News - Lenders
Mortgage Solutions | 15 Feb 2012 | 17:38
Five major UK mortgage lenders have confirmed that they have no plans to change their current interest-only stances, after the UK’s two biggest mortgage lenders, Lloyds Banking Group and Santander, both restricted criteria within a week of each other.
Nationwide, Barclays, the Royal Bank of Scotland, HSBC and Northern Rock, part of Virgin Money, all told Mortgage Solutions that they had no immediate plans to alter their interest-only criteria.
This follows today's decision by Lloyds to stop accepting cash savings as an acceptable repayment vehicle and take a more cautious approach to investment performance calculations, while Santander last week restricted its new interest-only lending to 50% LTV.
Yet, other lenders' interest-only criteria remains tough and the CML has said that the product will be relegated to a niche sector, despite the FSA relaxing its stance to a "more sensible" approach.
In its latest News and Views, the CML said: "Lenders will still need to restrict the types of vehicles used for repayment purposes and ensure whatever repayment strategy is in place has a reasonable chance of paying off the capital.
"This will still give many lenders cause for concern, despite the FSA making it clear that borrowers, not lenders, will ultimately be responsible for the repayment of the capital."
The CML added: "These proposals will do exactly what the FSA intends them to do - allow interest only to exist as a niche part of the market, but not as an everyday choice for borrowers."
Yet, AMI director Robert Sinclair said he believes the current levels of new interest-only business are already restricted enough to be in line with market and FSA expectations.
However, he added: "These new ‘standards' must only apply to new applications and cannot be applied to legacy business, for which no one ever envisaged such a high hurdle.
"Existing assets, with a haircut and no growth potential and no provision for further savings or investment, seems a very tough approach.
"Brokers are exceptionally concerned and see the delivery of such strict criteria as potentially excluding from the market many customers for whom interest only would be most suitable.
"I expect there to be some interesting discussions between my larger members and the lenders in the coming weeks and months on this."
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Recent comments
whilst i appreciate that cash reserves can be withdrawn or spent, if a client wants to borrow rather than use their savings they should be allowed to. however, the lenders will allow an investment such as an Endowment, Pension and/or ISA, stock market related than can go DOWN as well as up in value to secure an interest only mortgage ?? it beggars believe doesnt it? as for "legacy" clients watch this space.... i believe we'll have a bigger problem on our hands once these changes effect the existing business than we already have!
michael rogerson
16 Feb 2012 | 07:49
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