View more on these topics

Platform claims interest-only cap is bid to stave off more regulation

Platform says it is trying to prevent greater regulation being imposed on the industry by capping interest-only loans at 75% LTV and £500,000.

The lender says the changes it made last week to its interest-only policy brings it in line with the rest of the market.

A Platform spokesman says: “The Financial Services Authority is reviewing interest-only mortgages and we believe that making these changes could help lenders avoid greater regulatory intervention.”

Platform is also planning to expand its buy-to-let lending next year and is changing its criteria in preparation. It has increased the minimum age for a buy-to-let mort-gage from 18 to 25 and raised the minimum income from £15,000 a year to £20,000.

The interest-only changes follow the Royal Bank of Scotland and Coventry Building Society stopping interest-only for first-time buyers, Lloyds Banking Group capping deals at £500,000 and Northern Rock capping mortgages at 75% LTV.

Paul Diggle, property economist at Capital Economics, says lenders’ shift away from interest-only mort-gages will bring short-term pain.

But he adds: “The shift towards repayment mortgages may help close the gap between house prices and earnings, and therefore marks an important step towards a more sustainable mortgage market.”

In a speech to the Council of Mortgage Lenders last month Sheila Nicoll, director of conduct policy at the FSA, told delegates: “Some lenders are already changing their approach to interest-only. Sometimes the change is attributed to the Mortgage Market Review.

“We can’t take credit. Lenders changed policies before we signal-led we wanted to look at the topic.”

But she dismissed the idea that the market could self-correct without regulation.

She told delegates: “It’s true the system has moved back to more cautious levels. But we need to learn the lessons of the past.”


Retirement - thumbnail

Pension freedoms: stop the scams

At the beginning of 2015, we highlighted that the new pension freedoms that come fully online on 6 April also represent a very attractive opportunity for the criminal fraternity to scam savers out of some, or all, of their accumulated retirement savings.


News and expert analysis straight to your inbox

Sign up