The loans are available with a minimum 50% deposit at rates of 2.49% and 3.19% respectively. The society is also launching a fee-assisted two-year discount rate deal up to 50% loan-to-value (LTV), at a current rate of 2.30%.
The credit crunch in 2007 and stricter regulatory oversight has concertina’d the interest-only market. Lenders ran scared, refusing to lend over 50% Loan To Value or pulling products entirely.
Leeds however is confident that there is still a market for interest only and that for the right type of customer it makes sense.
Here Martin Richardson general manager, business development at Leeds BS explains: “We identified limited awareness of our interest only proposition and that there was a customer need in this increasingly underserved market. We feel that there is definitely a market out there for the right type of customer and we decided that we would provide a product for those customers where fewer lenders were prepared to operate, the interest only space.”
Richardson said that any customers considered for interest only needed to have a clear repayment strategy and a proven track record of increased equity. “It is important that there is a clear criteria laid out for repaying the loan from the off-set,” he added.
“These options include the customer selling the property at the end of the loan period. The option is then to either rent or buy a new property. Investment vehicles such as endowment policies still have a part to play in repayment of interest only mortgages.”
While some lenders have shied away from the interest only market in recent times, put off by some of the rhetoric from regulators, Richardson is clear that the regulators are supportive of the sector.
“The stance from regulators is very straight forward, providing the customer has a coherent and sensible payback method then interest only is a sensible way to lend. This was quite clearly laid out by Linda Woodall in her speech at the CML conference this year.
“Our lending is always designed to be responsible and we make sure that we have sufficient resources in place to ensure that this is the case.”
Richardson is confident that the products will spark a renewed interest in the market. “One of the reasons we launched the products was in response to feedback we were getting from brokers. We tailored them in order to meet the needs of their clients.
“We expect to see a steady level of demand and interest from brokers. We are confident that it will encourage many brokers who have not focused at the interest only market in recent times to have another look”
