Coventry Building Society is pulling out of interest-only residential mortgages for new lending.
From 3 December, the lender will only offer interest-only mortgages for buy-to-let loans.
Existing borrowers on interest-only will not be able to increase their borrowing on an interest-only basis but they will be able to port their existing mortgage.
Coventry sales and marketing director Colin Franklin says: “Residential interest-only mortgages have declined to less than 2 per cent of all residential mortgage applications. We have therefore decided the time is right to leave this market.”
Last week, NatWest and Royal Bank of Scotland announced they were pulling out of the interest-only market for new lending.
In October, Money Marketing revealed Nationwide had pulled out of interest-only for new lending. It also took the line that interest-only has become a niche product, representing less than 3 per cent of the applications that it received.
Between February and May, Santander, ING Direct, Leeds Building Society and Coventry Building Society all cut their maximum LTVs from 75 per cent to 50 per cent, while Skipton Building Society cut its maximum LTV from 75 per cent to 60 per cent and The Co-operative Bank pulled out of this type of lending altogether.
The FSA established as part of the final publication of the Mortgage Market Review that ultimate responsibility for repaying the capital at the end of an interest-only term rested with the borrower, not the lender.
Emba Group sales and marketing director Mike Fitzgerald says: “This seems to be a knee jerk reaction to the MMR and other lenders’ reactions. I think it is a lame excuse to say they do not write a lot of interest-only lenders. Ex-pat mortgages are not exactly mainstream yet you do not see lenders piling out of that sector.”