Santander reduces interest-only LTV to 50%

8 February 2012 | By Tessa Norman

Santander is reducing its maximum LTV for interest-only mortgages from 75% to 50%.

The change applies to both Santander and Abbey for Intermediaries’ lending criteria and will take effect from Friday.

A spokeswoman for Abbey for Intermediaries says: “We constantly review our offering to ensure it best meets the needs of our customers and following a review of our interest-only criteria, we have taken the decision to reduce the maximum LTV on our residential interest-only mortgages.

“For new applications with any amount taken on an interest-only basis, the maximum LTV for the overall loan will now be 50% LTV. This will encourage borrowers with less equity in their properties to choose a capital repayment mortgage, and ensure that the capital is being paid off in full over the term of the mortgage.”

She says that the lender assesses all applicants’ affordability on a capital and interest repayment basis, and therefore the policy change will not result in applications being declined that would have previously been accepted.

But she says: “However, it will remove the option to pay interest only for all accepted applicants above 50% LTV.”

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Readers' comments (18)

James Lindon-Travers | 8 Feb 2012 10:30 am
I suspect all the main Lenders will follow suit on this - the issue is interest only does have a place in mortgage world especially with more, complex cases and high value properties. I believe they should agree to look at interest only on case by case basis where there is a plausible and justifiable rationale instead of issuing a rigid policy.
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Mike Snorkins | 8 Feb 2012 10:34 am
So much for freedom of choice... you are free to do as we tell you. Unfortunately, I think you'll find the (interest-only) horse bolted about 4 years ago. Never mind, we'll catch it eventually. In the meantime, perhaps it would be safer to make ALL mortgages illegal? Any takers?
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Tim Lynch | 8 Feb 2012 10:36 am
“We constantly review our offering to ensure it best meets the needs of our customers"

Can somebody explain to me in what way the change to Abbey's interest only lending policy best meets the needs of its customers ?

We have arranged many interest only offset mortgages with Abbey for high income earners with very robust repayment vehicles. The door is now slammed shut for these low risk clients at Abbey.

IMO it would have been much more sensible for Abbey to ask for proof of repayment vehicle rather than impose an LTV max at 50%!
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phil | 8 Feb 2012 10:37 am
what an intuitive move, we don't want those pesky FTB's thinking that they have practical, flexible, payment options
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colin | 8 Feb 2012 11:22 am
sad to see the demise, but Abbey was really out of kilter with the rest of the market in that it allowed Pure Int Only, majority of others want existing endowments/ISA's or if sale of property..66% LTV with £150k equity.

But to cut to 50% seems to be an over reaction but i guess its their money and they will dictate how its lent!!!!!!!

Wonder if these same rules apply in branches ????
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Derek Frost | 8 Feb 2012 11:34 am
Frankly, with their service offering and current pricing, it won't be difficult to recommend an alternative lender!
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Bobby | 8 Feb 2012 11:41 am
So someone with repayment vehicles in place on track for 100% of the mortgage can now only have 50% on interest only ?! This is down to the FSA's meddling. Interest only is going to be banned to all intents and purposes. The big worry is now that in 2 years or when interest rates finally go up 8 million out of 11 millions mortgage customers, 70% of them now on a low variable rate will not be able to re mortgage or get another mortgage. Interest only - declined, high loan to value - declined, minor adverse credit - declined, self employed/self cert - declined. All we will have left is a completely rigid and inflexible mortgage market for employed, long track record, secure profession, A1 credit, not even 1 late payment on a credit card, repayment mortgage, loan to value 75% or below. A mortgage will be for the privileged few, ie 20% of the UK population. When people can't move and rates go up there will be a flood of reposessions and people being made homeless. Thanks for everything FSA, thanks for what you have done to the UK mortgage marketplace in your tenure. Please close the door and switch the lights off before you leave.
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Tim Lynch | 8 Feb 2012 11:44 am
Just found out that Abbey are now dual pricing in favour of direct business, and the differential at 75% LTV is 0.3%!

This is very bad news, as they have always been fair to brokers since the downturn in this respect!
What is going on?
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colin | 8 Feb 2012 11:53 am
Derek, due to their rates the service offering for straight forward cases is pretty rapid right now!!!!!!!!!

can t disagree there is some pretty anal stances they take sometimes and extra info which appears pointless requested.....but lets be honest they are defo not alone in that right now!!!!!!

For some of their faults equally they do have plenty of positives......i d rather place my business with them than Accord thats for sure........perhaps its because I have a great BDM & KAM that are able to oil the wheels when required!!!!!

SO PLEASE CAN WE HAVE SOME DECENT RATES NEXT WEEK ABBEY ????? LOL
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Ian McFarlane | 8 Feb 2012 12:05 pm
The big losers here are the clients who are sitting on interest only mortgages which have been arranged under the old rules with perfectly adequate exit strategies in place. These now become mortgage prisoners.
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