Nationwide’s decision to slash its interest-only LTV from 75% to 50% has been branded a blow for the mortgage market.
The mutual made the change across its residential mortgage range last week in response to changes by other lenders.
James Lindon-Travers, mortgage practice principal at Lindon-Travers Associates, says: “This is another nail in the coffin for interest-only, as I expect all lenders’ LTVs will be cut to this level soon.
“Interest-only has a place in the market and lenders should not take a ’one size fits all’ approach to this type of lending.”
Mike Fitzgerald, sales and marketing director at Emba Group, says the move will have a huge impact on the market.
He adds: “This is bad news for the industry as well as home buyers. Options for interest-only clients are becoming increasingly limited and I know a lot of brokers are worried about the way this sector is going.”
Adrian Knott, director of Adrian Knott Partnership, adds: “Nationwide’s decision is another hammer blow for borrowers and the property market.
“For many of my clients – those with bonuses or high incomes – interest-only loans are the most appropriate product, but LTV revisions are leaving them high and dry.”
Last month Santander reduced its maximum LTV for interest-only from 75% to 50%, and just days later Lloyds Banking Group imposed restrictions on the repayment vehicles it will accept for interest-only.
Coventry Building Society also cut its maximum interest-only LTV from 75% to 50% last week.
Martyn Dyson, head of general insurance at Nationwide, says: “A number of major lenders have restricted criteria for interest-only and Nationwide needs to be able to manage application levels in a sustainable manner.”