ING Direct has cut its maximum loan-to-value ratio on interest-only lending from 75 per cent to 50 per cent.
Borrowers can top up their borrowing to 80 per cent LTV as long as the additional 30 per cent is on a capital repayment basis.
If the sale of the property is the repayment vehicle, ING will insist on a minimum £165,000 equity in the property for all interest-only and part-interest-only mortgages.
It will no longer accept cash Isas as a suitable repayment vehicle but will accept endowments or pension plans where the mid-point projected value exceeds the interest-only part of the loan.
ING will also accept unit trusts, personal equity plans, stocks and shares Isas or professionally managed share portfolios if the current value exceeds the interest-only part of the loan.
ING is the latest in a string of lenders to restrict interest-only criteria. Earlier this month, Principality Building Society restricted its interest-only lending to three products but kept its maximum LTV at 85 per cent.
In March, Leeds Building Society and Skipton Building Society cut their maximum LTV from 75 per cent to 50 per cent and 60 per cent respectively.
In the same month, Nationwide Building Society and Coventry Building Society cut their maximum interest-only LTVs from 75 per cent to 50 per cent and Santander announced it will no longer accept pensions or the sale of a second property and cash savings as repayment vehicles.
In February, Santander cut its maximum LTV from 75 per cent to 50 per cent.
Mortgage Concepts Associates director Mike Richards says: “Lenders are making a kneejerk reaction to the interest-only proposals in the mortgage market review.”