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Categories:Advisers,Mortgages

Santander reduces interest-only LTV to 50%

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Santander is reducing its maximum LTV for interest-only mortgages from 75 per cent to 50 per cent.

The change applies to both Santander and Abbey for Intermediaries’ lending criteria and will take effect from Friday.

An Abbey for Intermediaries spokeswoman says: “We constantly review our offering to ensure it best meets the needs of our customers and following a review of our interest-only criteria, we have taken the decision to reduce the maximum LTV on our residential interest-only mortgages.

“For new applications with any amount taken on an interest-only basis, the maximum LTV for the overall loan will now be 50 per cent LTV. This will encourage borrowers with less equity in their properties to choose a capital repayment mortgage, and ensure that the capital is being paid off in full over the term of the mortgage.”

She says that the lender assesses all applicants’ affordability on a capital and interest repayment basis, and therefore the policy change will not result in applications being declined that would have previously been accepted.

But she says: “It will remove the option to pay interest only for all accepted applicants above 50 per cent LTV.”

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Readers' comments (4)

  • Another nail in our coffin then !

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  • And the reason is...?

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  • Reasons why Santander is probably reducing LTV on interest only mortgages is that people should have repayment vehicles in place to repay their mortgage. I read an article recently that claimed that over 50% of all of the mortgages in London are on an interest only basis with no repayment vehicle in place. This is a truly scary statistic and just shows how people over the last 30 years have speculated on house prices always increasing. If lending rules remain the same surely we could be heading for a more stable housing market and if that is the case interest only mortgages could increasingly cause problems for individuals in future.

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  • Pure Interest Only I agree with. But there are many forms of repayment vehicles:

    Endowments, Investments, ISA's , Unit Trusts, monthly or regular overpayments, Inheritances, Profit from sale of second properties, Earned Bonus, Commission payments, Downsizing, Share sales, Income Tax refunds, Equity release and even a win on the horses.

    As an IFA these are all methods I have used on behalf of clients to pay down a mortgage. Usually this is down to a discussion I have with my clients in their review process.

    This is not being undertaken for the benefit of clients but merely for the benefit of Santander satisfying an out of touch regulator.

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