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Skipton changes interest-only policy on repayment vehicles

  • 12/06/2017
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Skipton changes interest-only policy on repayment vehicles
Skipton Building Society has updated its interest-only mortgage range for borrowers with £400,000 equity in their property or for borrowers with minimum pension pots of the same value.

The changes allow borrowers to use the sale of their home as the exit strategy on the condition that there is £400,000 of equity remaining after a mortgage has been secured on the property.

Sale of property will only be permitted to cover the mortgage up to 50% loan-to-value (LTV) but a combination of vehicles can be used if the mortgage exceeds that limit up to a maximum of 70% LTV.

If the mortgage is part capital repayment and part interest only, the LTV can be extended to 80%.

Paul Darwin, Skipton’s director of intermediary relationships, said the changes to the interest-only policy were “appropriate and responsible”.

Pension savings can be used as a repayment vehicle. Up to 15% of the borrower’s projected pension pot can be used where the minimum projected value of the pot is £400,000.

The society has removed its £500,000 maximum loan cap with its standard maximum loan limits now being applied.


New products

Skipton has also added products to its interest-only range in the 60%, 70% and 80% LTV brackets for purchase and remortgage customers.

The purchase range, which offers free valuations, includes a fee-free two-year fix at 1.66% to 60% LTV, and a 1.33% to 60% LTV with £1,495 completion fee. For borrowers with a 20% deposit, a 1.79% rate is available with a £1,495 completion fee. Five-year fixes include a fee-free rate of 2.25% to 60% LTV and 2.29% to 80% LTV with a £1,495 completion fee.

The interest-only remortgage range, which offers free valuations and standard legals, includes a fee-free two-year fix at 1.79% to 60% LTV and 1.46% to 70% LTV with £1,495 completion fee. The five-year fixed range includes a fee-free 2.24% rate up to 60% LTV and 2.21% to 80% LTV with £1,495 completion fee.

The enhanced policy for interest-only residential lending is also available for those who want Skipton Bespoke, a proposition which the society launched recently for customers looking to borrow mortgages of over £1m.

The bespoke service allows brokers to help clients who have unique requirements for larger mortgages, allowing them to mix and match key product elements, such as the term, fee and product incentive.


Exit strategy

Darwin said: “At Skipton we recognise that there is a place for interest only in the market as long as borrowers have a defined exit strategy to repay the loan. We are taking an appropriate and responsible approach to this type of lending.

“Our latest lending policy changes are a reflection of this and provide greater choice to borrowers looking at this route.”

Alongside the interest-only changes, the society has added to its fixed rate range for capital repayment borrowers.

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