Newcastle Building Society has reduced its interest-only maximum loan to value from 75 per cent to 50 per cent.
If an interest-only option is selected, borrowers cannot pass 50 per cent LTV, even if the remainder of the loan is on a capital repayment basis.
The society says it took the decision as a result of similar moves made by other lenders.
In a note to intermediaries last week, Newcastle says: “There has recently been a general downward movement in the marketplace in the level of interest-only borrowing allowed by lenders and our move is a reflection of this. We believe that being able to access an interest-only mortgage at a reasonable level is appropriate for borrowers in certain circumstances and it is our intention to review our position on an ongoing basis.”
In the past two months, Santander, ING Direct, Leeds Building Society, Nationwide Building Society, Clydesdale Bank and Coventry Building Society have all cut their maximum LTVs from 75 per cent to 50 per cent while Skipton Building Society has cut its maximum LTV from 75 per cent to 60 per cent.
Chadney Bulgin mortgage partner Jonathan Clark says: “Some of the smaller banks and building societies have left their interest-only propositions untouched until now to capture a bit of business but, ultimately, they will be forced to fall in line eventually or risk getting a disproportionate amount of business on interest-only.”