Lending criteria tightened on Santander mortgage interest-only deals.
In a recent tightening of their lending criteria, it has been announced that Santander mortgage interest only deals will now be made available only to those borrowers who have a minimum 50 per cent deposit.
Due to a market wide change in lending criteria interest only mortgage borrowers are to face increasingly tough checks. Many of those currently on interest only deals may be left unable to move or switch to new deal and, any borrower with under a 25 per cent deposit or equity could be forced to move from an interest only to repayment deal.
The fear is that Santander mortgage interest only deals are the first to be changed but, soon other lenders will follow suit which could potentially add hundreds of pounds to home-owners mortgage bills.
For the last four years Santander mortgage interest only deals were freely given, including to those borrowers with no deposit. Indeed prior to the credit crisis, a third of home-owners took out interest only mortgages paying off the interest and not the capital.
It is estimated that around one and a half million home-owners will face massive financial problems over the next decade, as their interest only deals come to an end and, they do not have the means to pay off the capital still owed.
The FSA warns that those borrowers who are on interest only deals need to put some form of saving scheme in place to enable them to play off their mortgage in full at the end of the term.
