ING Direct is to cut its maximum loan-to-value 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 remaining 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.
The lender will no longer accept cash Isas as a suitable repayment vehicle. However, it will accept endowments or pension plans where the mid-point projected value is sufficient to repay the interest-only part of the loan and these plans have been in place for at least three months.
ING will also accept unit trusts, personal equity plans, stocks and shares Isas or professionally managed share portfolios where the current value is sufficient to repay the interest-only element of the loan.
Current criteria will be applied to any pipeline cases submitted with the booking fee by midnight tomorrow.
Last week, Principality Building Society restricted its interest-only lending to three products but kept its maximum LTV at 85 per cent.
In March, Money Marketing revealed Leeds Building Society cut its maximum LTV from 75 per cent to 50 per cent and Skipton Building Society cut its maximum LTV from 75 per cent to 60 per cent. In the same month, Nationwide Building Society and Coventry Building Society cut their maximum interest-only LTV to 50 per cent from 75 per cent.
Money Marketing also revealed in March, that Santander had further tightened its interest-only criteria by announcing it would no longer accept pensions, the sale of a second property and cash savings as repayment vehicles. In February, it cut its maximum LTV from 75 per cent to 50 per cent.