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.”