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Principality cuts interest-only rates

Principality Building Society has reduced the rates on all three of its interest-only products.

The 50 per cent, 75 per cent and 85 per cent LTV mortgages are available on a three-year discount rate.

Principality has cut the rate on the 50 per cent LTV mortgage from 3.59 per cent to 3.39 per cent. It has cut the 75 per cent LTV product from 4.49 per cent to 3.99 per cent and the 85 per cent LTV mortgage from 4.69 per cent to 4.39 per cent.

A spokeswoman says: “The decision was made to bring the rates more into line with the rest of our product offerings.”

In April, Principality restricted its interest-only offering to three products. Interest-only was previously available on Principality’s entire range.

A number of lenders have 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 the interest-only market. The changes come ahead of the MMR, which proposes to restrict the sale of interest-only mortgages to consumers that have a “clearly understood and credible strategy” for repayment. The FSA is due to publish the final MMR rules in the autumn.

Coreco communications director Andrew Montlake says: “You will probably see a few more lenders cut their interest-only rates as we get closer to the MMR. The pendulum always swings too far in one direction and the market will inevitably realign.”

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