Available from 21 January, the ‘Low Start Mortgage’ offers a fixed rate interest-only loan, which converts to capital and interest with the move to Standard Variable Rate at the end of the three-year term.
Offered to a maximum Loan-to-Value of 80%, rates start at 3.09% for the 60% LTV, rising to 4.49% for the 80% LTV, with fees of £999.
Ian Gray, mortgage manager at Largemortgageloans.com, said the lender risked being overwhelmed on 21 January but this is good news for brokers who survived Clydesdale’s advice firm panel cull.
“The loans isn’t restricted to first-time buyers so it will also encourage borrowers into the remortgage market who previously feared losing their interest-only advantage.”
Gray said the £300,000 loan minimum is sensible because borrowers earning enough to afford a £300,000 loan are likely to have other sources of wealth making the eventual repayment of interest-only more affordable.
The loan will be restricted to the advised and private banking channels, but pulled from branches.
Like many other lenders, Clydesdale tightened its interest-only criteria in February 2012, reducing its maximum Loan to Value from 75% to 50% in some circumstances, but continuing to lend at 75% where criteria was met.
The bank will offer loans of between £300,000 to £1m interest-only, with loans of over £1m offered in a part-and part capacity up to 60% LTV.
Fred Sharp, head of mortgage distribution at Clydesdale Bank, said: “There is a clear need for interest only mortgage products in the marketplace, but this has to be in the right circumstances and with the right support- financially and advisory.
“Our new approach addresses both the need and the concerns associated with interest-only mortgage lending; we have retained the option while controlling the availability, and launched a new product that takes the best of both interest only and repayment mortgages to support borrowers looking for a new home.”
