Northern Rock makes interest-only changes
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Northern Rock will no longer accept certain repayment vehicles on its interest-only mortgages from Tuesday.
It will not accept inheritance, bonuses, dividends, regular overpayment and an intention to convert to repayment at a future date as acceptable repayment vehicles.
In March the lender reduced its maximum LTV from 85% to 75% for interest-only.
In addition, the acceptance of sale of property as a repayment vehicle will be limited to cases with a maximum LTV of 60% and £150,000 minimum equity.
A spokesman for Northern Rock says every case will now be assessed on an individual basis and an acceptable type of repayment will be something such as savings or other assets.
He says the move has been taken to maintain its position as a responsible lender.
It will continue to accept decisions in principles on the outgoing policy until close of business 28 May 2010.
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Readers' comments (1)
Anonymous | 27 May 2010 2:34 pm
Not all interest only mortgages without a repayment vehicle are to the detriment of customers. Some people have a genuine requirement for this facility. If you are selling your property within the next 5 years or so, to take out a repayment mortgage over that term would in most cases not be affordable and to extend out the term may not be possible for reasons such as retirement plans etc.
Whilst I appreciate that if you are planning to sell your house it would be sensible to limit the LTV on an interest only basis it must be kept proportional. In london the £150,000 minimum equity may not present such a problem but where I come from the average house proce is only £135,000 and so all of these changes are taking away finance facilities for us.
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