Lenders introduce capped mortgage LTVs for interest only deals.

Various UK lenders have recently capped mortgage interest only loan to value levels at the same time as standard variable rates are on the rise. This has led to concern from the Financial Services Consumer Panel that around a million borrowers may now be unable to re-mortgage as a result.

There are thought to be many people struggling with monthly payments even though they have cheaper interest-only mortgages. These borrowers may find it impossible to move or get funding for improvements if they need to.

Five lenders have capped mortgages at 50% loan to value including Santander, Leeds, Nationwide and Coventry. Many others have reduced loan to value caps to between 60 and 75%, for example Skipton Building Society from 75% to 60% and Manchester Building Society from 70% to 60%

HSBC/First Direct still have interest only options at 75% at time of writing but these are only available if you have at least a £30,000 salary. The market for interest only loans is changing rapidly along with the stricter lending criteria so the availability of this type of product is becoming much more limited.

The changes apply if you want a new interest only product and anyone who has an interest-only mortgage with a loan to value of more than 50% would be advised to look at their options as soon as possible.

If you have an existing interest only loan and are worried about rising interest rates or looking for an alternative interest only deal then call Deal Direct. We know the level at which different lenders have capped mortgages and we are aware of their varied lending criteria, so we are well placed to find you a good deal.