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Nationwide cuts interest-only LTV to 50%

Nationwide Building Society is slashing its interest-only LTV for residential lending from 75% to 50%.

The society says the change is in response to changes made by other lenders and takes effect tomorrow. 

Martyn Dyson, head of mortgages at Nationwide, says: “A number of major lenders have recently restricted their criteria for interest-only mortgages and Nationwide needs to be able to manage application levels in a prudent and sustainable manner.  

“The group is therefore amending its policy to a maximum of 50% LTV.”

Nationwide lowered its LTV for interest-only to 75% in April 2011, it previously offered 85% LTV.

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  • Afro haired broker - dark skin too. 23rd March 2012 at 11:06 am

    The market is going to POP – and brokers will be inundated with enquiries.

    Time to up my fees me thinks – because its the tick box typical employee underwriters with no hair, afro hair, grey hair, ginger hair and ponytail hair that suck our bloood right now when we are trying to help clients.

    These people dont have a clue what its liek to be a broker.

  • Grey Haired Underwriter 22nd March 2012 at 1:40 pm

    My original post doesn’t seem to have come through so Luke I would mention that I resigned from a large lender (where I ahd a good salary and perks)because i could no longer put my signature to loans that I could not support. I joined a small building society that was and is very much a niche lender and have been amazingly busy ever since. In fact 2008 to date has been some of the busiest time of my working life.

    So in direct reply to your question I was not one of those unfortunate underwriters who were heavily dominated by a sales and marketing culture and who had CEOs that had absolutely no concept of risk

    I was lucky – I took a risk with mine and my family’s future but it paid off

  • Grey Haired Underwriter 22nd March 2012 at 11:44 am

    Luke, part of being an underwriter is to be reasonably thick skinned so I took your comments as a jest.

    Fortunately I’m in the rather lucky position of working for a small building society and am able to offer a lot of input into credit policy. This means that credit/risk here did not go out of the window as my anon supporter had the misfortune to face. In fact I left a large lender where I had a lending manager responsibilities because I thought that credit scoring was ruining the assessment of risk and because there were others who had no knowledge of risk who were influencing the score. To put it simply I wasn’t going to put my signature to a pile of manure. As for my workload I can happily say that I have never had a quiet period – small lenders take on the more conceptual cases and they take that much longer to put into context (far more enjoyable than computer says No). And since 2007 I don’t think I have ever been busier. Small Society’s have not had the funding problems in the same way as the large lender and there is no pressure to lend but I am trusted to make reasonable decisions based on my 30 plus years of lending so I can look at most deals that marginally fail score. I accept that my declines level might be higher but there again we are being asked to look at the cases on the margin. Just wish I could get some cheap funding so that our rates could be more competitive

  • Sub Prime Kaboooooom 21st March 2012 at 3:49 pm

    Luke I’ll tell you where GHU you was in 2008…….same place as me probably.

    With a weath of knowledge, an ability to assess risk and literally no power to truly use them because of ridiculous criteria, pushy BDM’s and risk strategy that went ‘baaaaaaa………baaaaaaaa’ as it hung onto the shirt tails of every other lender who let ‘credit creep’ seep in.

    It was bloody heart breaking not being able to underwrite properly – don’t forget underwriters were not targeted or incentivised by now many cases they approved either.

  • Sub Prime Kaboooooom 21st March 2012 at 3:49 pm

    Luke I’ll tell you where GHU you was in 2008…….same place as me probably.

    With a weath of knowledge, an ability to assess risk and literally no power to truly use them because of ridiculous criteria, pushy BDM’s and risk strategy that went ‘baaaaaaa………baaaaaaaa’ as it hung onto the shirt tails of every other lender who let ‘credit creep’ seep in.

    It was bloody heart breaking not being able to underwrite properly – don’t forget underwriters were not targeted or incentivised by now many cases they approved either.

  • John cena 21st March 2012 at 2:07 pm

    Of course I have Bobby.

    But you’re acting as though the world is ending tomorrow. ‘Devastating effect’? no – people will just take out repayment mortgages rather than IO to save a few quid. Which in all honesty they shouldn’t have been doing anyway.

    If clients can’t afford the repayment mortgage but can afford the IO equivalent then i’d suggest that they’re stretching themselves a bit thin anyway – and any adviser suggesting otherwise is making a rod for their own back.

  • Luke Atkinson 21st March 2012 at 12:53 pm

    Richard – I wasn’t ”attacking” GHU, I was simply making a comment in jest – I agree with his points. My comment was in relation to loans he would have sanctioned pre Lehmans Bros, were his views the same back then? It would be interesting to get an experienced and clearly knowledgable underwriters view on where underwriting was at in 2008.

    And anon – I have left the mortgage industry but not Financial Services, although thank you for taking the time out of your busy day to post a comment.

  • bobby 21st March 2012 at 11:09 am

    John, you did not hear about Abbey, Lloyds Group or Halifax then ?, finger on the pulse. Every lender has or will do this so it will have a devastating effect on the market. In 3 months time when new and re mortgage figures are announced I will be proved right.

  • Walter Winterbottom 21st March 2012 at 10:13 am

    GHU is also bang on about the misuse of the TCF term.

    Just because the client (or broker!) doesn’t like something doesn’t mean that its anti TCF.

    Otherwise i’d be putting in a complaint that Northern Rock won’t let me have a 20 year fixed term of 2% with 9 free payment holidays per year and a complimentary cake on every birthday.

  • John cena 21st March 2012 at 10:00 am

    The entire mortgage market wont be able to cope because coventry have reduced their IO policy to 50%? Really? Really? get a grip!

    Why stop there? As Nostradamus once pointed out “In the year of the new century and two years, From the sky will come a great King of Terror – and Coventry Building Society will require everyone to have repayment mortgages”

    People forget he said that last bit.

  • Mark Stroud 21st March 2012 at 10:00 am

    Luke we thought you left the industry a while ago? If you couldn’t hack it just move on.

  • Richard Rouse 21st March 2012 at 9:42 am

    @Luke Atkinson – 20 Mar 6.58pm

    Rather than attacking GHU, why don’t you try answering his points? I suspect you can’t.

  • Bobby 21st March 2012 at 7:48 am

    Coventry now reduced IO to 50% ! This is the beginning of the end. The property and mortgage market will not be able to recover from this.

  • Richard 20th March 2012 at 7:44 pm

    Anyone think about terminating their authorisation and would like to work part/full time as a registered introducer please google signature-mortgages. Leads supplied too! Richard.

  • Luke Atkinson 20th March 2012 at 6:58 pm

    Grey Haired Underwriter – Given the views you frequently express, I’m assuming your ”approved” stamp was nearly redundant pre 2008?

    What did you do in the boom years, it must have been quiet on your desk.

  • Grey Haired Underwriter 20th March 2012 at 4:37 pm

    Get real guy – any lender doing high IO deals will be swamped by brokers who see it as a primary selling point. They probably wouldn’t be able to cope with volumes as being one of the only lenders in the big 6 that offered high IO nor do they want an unbalanced mortgage book that is heavily skewed towards IO.

    I do agree with the point about taking part and part loans but I suspect that the additional work entialed in setting up such mortgages is acting as a deterent.

    And I am so fed up of the misuse of the issue of TCF whenever these issues come up. The lenders will be treating every customer the same way so they are not treating customers unfairly. These rules apply to new borrowers and are not retrospective. How in the Lord’s name are they treating people unfairly. Just because the move isn’t liked doesn’t make it anti TCF

  • bobby 20th March 2012 at 2:26 pm

    This

    Mortgage volumes will continue to shrink to virtually nothing. New mortgages will be around 30000 a month, 75000 needed for a functioning market and re mortgages will drop below 20000. The SVR rises will not create a re mortgage bonanza as some deluded commentators have suggested as 8 out of 10 people who may want to re mortgage will not be able to because of ridiculous over the top criteria, a computer says no mentality and no appetite to lend. Self employed, self cert, any minor and I mean minor adverse, any ltv over 75% and an effective banning of interest only and 8 out of 10 millions mortgage borrowers will not be able to move.

    This will mean lenders will just service their mortgage books and their mortgage prisoners on whatever svr they choose to charge them. This is ideal for lenders as their profits will go up and no more having to pay any proc fees.

    The banks will dual price us out of the market on new mortgages and dual service and dual lend, meaning the clients will get a better rate, quicker admin and borrow more if they go through the bank than us.

    The lenders are on a path of complete annihilation of the intermediary sector.

    Even Halifax product transfers now require fresh underwriting which means they will probably say no and force them to stay on the svr and again , higher profit margins and no proc fees.

  • bobby 20th March 2012 at 2:25 pm

    ” just do it ” is very simplistic. Have you seen what the job prospects are out there for a 50 year old ? But I am doing it, probably bankruptcy and repossession and start again.

  • Shaks 20th March 2012 at 1:52 pm

    So Nationwide only changed it’s policy in Interest only because it was following other lenders??? What happened to independent thought? Perhaps If Halifax jumped of a cliff, Nationwide would follow too!! This policy is going to have a catastrophic effect on the market as FTB’s are pushed out of the market. FTB’s are the biggest users of Interest Only, so why damage the lifeblood of the market?

  • Luke Atkinson 20th March 2012 at 1:43 pm

    Bobby – you’ve been threatening that for months, just do it!

    The problem will arise when interest rates rise, mark my words. House prices are bound to fall when no one can remortgage – self cert, sub prime and now interest only mortgage prisoners – be interesting to see the % of mortgaged homes this affects?

  • Des Platt 20th March 2012 at 1:16 pm

    Have to agree with Bobby. I am retiring at the end of this year; decision made last year.I love the clients and they’ve been a joy to work for but hate most of the lenders apart from a few mutuals I could never go back to selling the banks and building societys rubbish insurances.Not that I ever did much interest only but it does seem symptomatic of a dying industry

  • Mark Finnegan 20th March 2012 at 1:08 pm

    For all of you that will be leaving the industry – please give me a call at Complete Mortgages Guildford (Google it) and I’ll happily take on your client banks.
    Will give you a cut of the first deal for each client.

  • Ancient Wisdom...is a mortgage broker in N3 20th March 2012 at 12:16 pm

    WTF! Why not abolish interest only altogether for residential mortgages?

    …oops, looks like we are heading that way already.

    Property prices are in line for big falls now its so hard to get a mortgage that is affordable – all the estate agenst I deal with are saying there is less stock coming on because people cant afford tough new criteria!

  • Bobby 20th March 2012 at 12:12 pm

    The ONLY future for the intermediary is to leave the industry, as I have decided to do this week after 20 years or work as a mortgage ” advisor ” at a Bank or Building Society. There is no other future.

  • Stuart Gregory 20th March 2012 at 11:24 am

    Well I can blow the ‘manage application levels in a prudent manner’ argument – I got an email from a recruitment agency in Bournemouth last night asking me if I knew of up to 25 people who could work immediately at Nationwide..

  • Andrew Haynes 20th March 2012 at 11:16 am

    Why can’t the 50% limit, or whatever percentage limit an individual lender wants apply, only apply to the interest only portion of the loan and not the entire loan where it is part and part? What is wrong with having 50% on interest only and 25% on repayment? Why do so few lenders have this more common sense approach? I appreciate the risk aspect of providing interest only, but surely this is more TCF?

  • Phil Shelford 20th March 2012 at 10:45 am

    Not a surprise. Pure interest only will be gone within a year. Only mugs see any future in being a mortgage broker going forward

  • chris roberts 20th March 2012 at 10:43 am

    To quote – “A number of major lenders have recently restricted their criteria for interest-only mortgages and Nationwide needs to be able to manage application levels in a prudent and sustainable manner.” Therefore a decision made not in the best interests of clients or their needs, moreover a commercial decision to mange application levels – how does that sit with the principals of TCF?

  • James Lindon-Travers 20th March 2012 at 10:30 am

    Another nail in the coffin – last one out turn the lights out!