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Top lenders deny further interest-only retractions on way

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  • 09/10/2012
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Top lenders deny further interest-only retractions on way
Major UK mortgage lenders have confirmed to Mortgage Solutions they have no plans to change their current interest-only stances, after Nationwide Building Society decided to stop offering interest-only mortgages to new or additional borrowers.

Lloyds Banking Group, Santander, Barclays, the Royal Bank of Scotland, HSBC, Virgin Money and Yorkshire and Coventry building societies, all told Mortgage Solutions they have no immediate plans to alter their interest-only criteria.

Last week, Nationwide said it has seen a sharp decline in lending on interest-only products, with just 3% of its new lending on interest-only.

The mortgage industry has been speculating over whether other lenders, who have been monitoring the interest-only sector of the market closely, will make the same move as Nationwide.

Ben Thompson, managing director of Legal & General mortgage club said what’s most interesting is what happens next.

“Some will no doubt follow this move as they won’t want to be selected against for interest-only, however, others will see this as an opportunity.

“It is clear that for the lenders that are prepared to take the necessary steps and checks required to assess the genuine plausibility of interest-only repayment plans, this represents an opportunity.

“There has for some time been a view that interest only would end up as some sort of niche, with a lengthier process and more regular checks in place, and a slightly loaded pay rate. It looks as though we might well have just seen the catalyst for this change.”

Alongside Nationwide, the Co-operative Bank have refused to offer interest-only mortgages since May and the Royal Bank of Scotland and Coventry building society are no longer offering interest-only to first-time buyers.

Ian Gray, senior mortgage manager at Largemortgageloans.com said he believes that changes over lenders’ interest-only policies are on the way.

He said: “I do predict that other banks will follow suit in the coming months, if only to avoid being one of the only leftover banks accepting these kinds of applications.

“As brokers, we need to prepare for this and start talking to our clients about a backup plan, should they be planning a house move or remortgage in the next little while, in case they’re assuming it will be OK to get the new loan on an interest-only structure.”

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