Low mortgage rates but Lloyds interest only deals to be heavily restricted.
Mortgage rates are at an all time low, but fewer borrowers will now qualify for Lloyds interest-only deals.
The Lloyds Banking Group are tightening their lending criteria and have announced that they are no longer prepared to accept borrowers cash savings, including ISAs, as a way of funding the repayment element of interest-only mortgage deals.
The Lloyds group which includes, the Lloyds TSB, the Bank of Scotland, the Halifax and the Cheltenham & Gloucester has announced that it views investment products like endowments and equity ISAs as the best way of settling an interest-only repayments.
Many high street lenders have also tightened their criteria which is making it potentially impossible for thousands of interest-only mortgage borrowers to move home. Lenders new strict rules now also mean that few new borrowers will be considered for mortgage rates offered for interest-only deals.
A Lloyd's spokesperson said in the future even a large cash lump sum would not be considered as an acceptable repayment vehicle. A borrower will be required to have a minimum of £50,000 in a suitable investment vehicle, and even then they may only borrow a maximum of 80 per cent of the total value invested.
These rules apply to new customers and existing home-owners who want to re-mortgage.
Market commentators advise that the borrowers who may be disadvantaged most are those with an existing interest-only deal, who would like to remortgage. The fear is that some borrowers, with what they thought were perfectly acceptable repayment strategies, may find themselves unable to meet the new lending criteria.
Simply put - borrowers who want to lock into fixed mortgage rates to protect themselves from an interest rate rise may not be able to.
