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Lloyds ups scrutiny on interest-only repayment plans

Lloyds Banking Group borrowers with an interest-only mortgage who are looking for a further advance will now be asked to provide evidence of a repayment plan for the entire loan.

Previously, Lloyds asked borrowers to provide evidence of a repayment method for the additional amount that they wished to borrow. But, from May 28, borrowers have to show evidence that they can pay off the entire loan, if the existing mortgage is interest-only.

In February, the lender tightened its interest-only criteria, in terms of its accepted repayment vehicles, for new customers by placing a minimum value of £1m on a pension fund and a minimum value of £50,000 for investments. These minimum values will be waved for further advance customers.

The move is to ensure borrowers can repay the capital at the end of the term.

In March, FCA chief executive designate Martin Wheatley warned of an interest-only “ticking time bomb” who do not have a feasible way to repay the capital at the end of the term.

A number of lenders have significantly tightened their interest-only criteria since the start of the year, with many capping their maximum loan-to-value at 50 per cent while The Co-operative Bank pulled out of interest-only altogether.

John Charcol senior technical manager Ray Boulger says: “It is hard to argue with what Halifax are doing, although it will not be helpful for those who want a further advance and it will mean less people will be able to qualify.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I would argue it – they are retrospectively amending their lending contract.

  2. Stuart, disagree.

    They aren’t – they’re just saying if you can’t repay the loan AND the further advance, you can’t have the further advance. The original loan stays as is i.e. no retrospection.

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