Coventry Building Society will no longer allow interest-only mortgages for first-time buyers, becoming the latest of a number of lenders that have made changes to their policy on interest-only products.
The lender will also no longer offer interest-only mortgages on loans over £500,000 and no longer accepts downsizing and the sale of a second property as acceptable repayment vehicles.
It has also limited the loan-to-value on interest-only mortgages to 75 per cent.
In July, the FSA said – in a consultation paper – it is looking to open up a discussion about how lenders’ controls around interest-only mortgages could be tightened. The regulator said it will consult on the new rules later in the year.
A spokeswoman says: “Other lenders have changed their position so we have also changed our position to keep in step with the market. We have restricted interest only lending for first time buyers as a responsible lender we want to encourage responsible borrowing and ensure that FTB’s only take on affordable repayments.”