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Santander tightens interest-only noose

Santander has further tightened its interest-only criteria and will no longer accept pensions, the sale of a second property, bonuses or cash savings as repayment vehicles.

The move, which was revealed by Moneymarketing.co.uk, takes effect from March 28 and comes less than two months after it slashed its maximum loan-tovalue ratio for interest-only lending from 75 per cent to 50 per cent. The changes will apply to direct and intermediary channels.

Santander will only accept sale of main residence or endowments, stocks and shares Isas, investment bonds or unit trusts as repayment vehicles. It will not consider future growth projections for these vehicles and they must be at least equal to the value of the loan and be professionally managed. It will also apply a buffer of £100,000 between current property value and the total loan required if the sale of the property is the repayment vehicle. Combining the sale of property and investments is not possible.

This week, Skipton Building Society cut its maximum LTV for interest-only lending from 75 per cent to 60 per cent.

Last week, NatWest Intermediaries Solutions temporarily suspended interest-only mortgages through intermediaries and both Nationwide Building Society and Coventry Building Society cut their maximum LTV for interest-only lending from 75 per cent to 50 per cent.

Chadney Bulgin mortgage partner Jonathan Clark says: “Santander is taking away most of the vehicles that people use as a means of paying their mortgage. It is pretty prescriptive. Santander seems to be leading the way on tightening interest-only criteria and I fear others will follow.”

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