The move, effective from March 28, comes a month after it cut its maximum loan-to-value for interest-only lending from 75% to 50%.
The changes will not affect existing borrowers and will apply to both direct and intermediary channels.
From next Wednesday, Santander will only accept the sale of the main residence or investments including endowments, stocks and shares Isas, investment bonds or unit trusts as repayment vehicles.
However, the lender will not consider future growth projections for these investment vehicles and they must be at least equal to the value of the loan. Santander will also apply a buffer of £100k between the current property value and the total loan required.
The news follows NatWest Intermediaries Solutions’ decision to temporarily suspend its interest-only lending.
Earlier this week, both Nationwide Building Society and Coventry Building Society cut their maximum LTV for interest-only lending from 75% to 50%. In February, Santander decided to cut its maximum LTV on interest-only to 50%.
A Santander spokeswoman says: “We constantly review our lending policy to ensure that we are lending responsibly. We believe these changes are prudent in today’s challenging economic environment and follow recent competitor changes in this area.”