The bank concluded that acceptable repayment vehicles for interest-only mortgages are endowments, pensions, Isas, share portfolios or a lump sum.
However, Lloyds no longer accepts the sale of main residence, sale of a business or inheritance as proof of a person’s ability to pay back mortgage as it argues that “it is important that repayment vehicles can provide certainty of their future value”.
The Mortgage Practitioner principal Danny Lovey says he cannot see how the sale of a home is rejected because you can’t be sure of its future value when the same can be said about Isas or endowments.
He says: “The certainty in the future – what does that mean? If you live in a property, there’s a certainty of a value. If you argue that the price might go down then, yes, the price might go down.
“But if you take an Isa or endowment, how can that be less risky than the future value of your home? An Isa or endowment is completely dependent on investments – the amount of money you put in to provide a pot at the end.”