Skipton restricts interest-only
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Skipton Building Society has become the latest lender to restrict its interest-only mortgages and will now only offer them for a maximum of 75% LTV.
From October 1 any amount above 75% LTV must be on a capital and interest basis.
In addition the maximum loan size for an interest-only loan will be £500,000.
It says all interest-only mortgages must have an appropriate repayment vehicle in place.
Yesterday Skipton announced it was withdrawing its 95% LTV direct mortgage and a number of 90% deals.
The Council of Mortgage Lenders recently warned that the Financial Services Authority risks killing off interest-only mortgages if it goes through with its Mortgage Market Review.
The FSA’s view is that interest-only should be used only where there is a genuine repayment method in place. The consultation paper casts doubt on whether sale of the property should qualify as one.
The CML says the FSA paper is likely to lead to interest-only mortgages being withdrawn.
Several lenders such as Lloyds Banking Group have in recent months tightened their interest-only policies.
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Readers' comments (5)
Anon | 28 Sep 2010 5:34 pm
I TOOK MY MORTGAGE OUT 25 YEARS AGO AND THE PROPERTY PRICE WAS £27000. IT IS CURRENTLY WORTH APPROX £200,000, THEREFORE A GROWTH OVER THAT TIME OF £173,000.
IF THE FSA HAD BEEN IN CHARGE 25 YEARS AGO AND BANNED INTEREST ONLY MORTGAGES AT THAT TIME, THEY WOULD HAVE LOST ME £173000.
WOULD I BE ABLE TO PUT A COMPLAINT AGAINST THEM FOR BAD ADVICE???
IS IT AGAIN ONE OF THEIR IDEAS THAT HAVE NOT BEEN THOUGHT THROUGH.
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Crazy gang IFA member | 28 Sep 2010 8:40 pm
Ridiculous!!! It should always depend on the situation. Rather this, than rent, surely !!! Who are they to dictate on this. What possible reason would there be for a person in retirement for instance to bust a gut to pay off their mortgage, for who's benefit??
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wish they would listen | 29 Sep 2010 9:21 am
I have a client who owns three unencumbered properties worth approx £700,000. She wants to raise £70,000 on her residential property in order to improve the other two properties ready to sell. Now she has 9 years to retire, so according to the FSA proposals it would be assessed on a repayment basis and she would not be able to borrow the money. Once the other two properties are sold she will have £400,000 in the bank and no mortgage ( a suitable repayment vehicle I would suggest). Common sense is required as not everyone works for a government quango and earns £80000 per year on an employed basis.
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John Duggan | 30 Sep 2010 9:18 pm
I have numerous retired clients who have interest only mortgages for the rest of their lives. After their days the property passes to their children. The alternative is to rent; and nothing passes to their children.
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John Peters | 4 Oct 2010 6:18 pm
I assume that this will be for new business only or will they be going through their book changing clients to repayment if they feel the need to raise extra revenue?
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