Barclays has scrapped its minimum loan size in favour of a minimum income requirement to determine if a borrower is eligible for an interest-only mortgage.
From this week, sole applicants must have a gross income of at least £75,000 to qualify for an interest-only mortgage with the lender.
For joint applicants, either one borrower must have a gross income in excess of £75,000 or, if neither person’s income meets this requirement, then joint gross income must be at least £100,000.
The lender has also made changes to its criteria around acceptable repayment vehicles. Where the borrower intends to use the sale of the property to clear their debt, there will be a minimum equity requirement of £300,000, which replaces the minimum loan size of £300,000. The maximum LTV of 50 per cent still applies.
For borrowers who wish to use a repayment vehicle that does not include selling the mortgaged property, the maximum LTV remains at 75 per cent, although the minimum loan size of £300,000 has been removed. Barclays accepts endowments, stocks and shares ISAs and unit trust or investment trusts.
The new rules do not affect current interest-only customers, who will be able to port, transfer equity or rate switch on their current terms as long as they are not borrowing more money. If they want to borrow more then the new rules apply.
A Barclays spokeswoman says: “This change is not about restricting lending, it is about ensuring that customers for whom interest-only is appropriate have the flexibility they need.”
Chadney Bulgin mortgage partner Jonathan Clark says: “It is clear this change in policy is aimed at more financially sophisticated clients in keeping with the FCA’s guidelines.”