Virgin Money has reduced its maximum loan-to-value for interest-only mortgages from 75 per cent to 70 per cent.
The revised policy applies to all decisions in principle generated from May 31.
There is no impact on existing customers with interest-only loans.
All pipeline applications which have been agreed prior to the new policy will be honoured.
Borrowers wishing to use the sale of another property to repay an interest-only loan will only be able to borrow up to 60 per cent of the property’s value.
Existing customers wishing to port their mortgage to a new property are able to do so, providing there are no changes to the loan size or the term length.
In the past two months, lenders including Santander, ING Direct, Leeds Building Society, Nationwide Building Society 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 and The Co-operative Bank has pulled out of this type of lending altogether.
Earlier this month, the FSA revealed a number of lenders have asked it to ban interest-only lending as part of the mortgage market review.