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homeowners to be moved off interest only.....
auctiondanny
Posts: 33 Forumite
Interesting article by the Daily Telegraph:
Santander is one of several high street lenders which have introduced the new rules for borrowers with interest-only deals. Halifax is also understood to applied changes.
Borrowers without sufficient equity in their homes are being moved onto repayment deals once their initial deal has come to an end.
Banks said the move was part of “prudent” lending during the economic downturn and are unable to rule out imposing a further squeeze on borrowers in the months ahead.
It comes amid concerns that the housing market is heading for a double dip as economists predicted that home owners could lose the equivalent of more than the average salary off the value of their homes.
Nationwide reported house prices dropping 0.9 per cent in August, following a 0.5 per cent drop the previous month.
Santander told The Daily Telegraph that customers with less than 25 per cent equity in their home would be moved onto a capital repayment basis.
It means that even if the rate they are currently paying does not rise, a borrower with a typical £150,000 would pay an extra £390 a month. This calculation is based on the borrower paying a mortgage rate of 3 per cent.
Melanie Bien, of mortgage brokers Private Finance, said: “For home owners with interest-only mortgages, a forced switch onto a repayment deal by their lender at the end of their fixed or discounted period would lead to a significant rise in their monthly payments. For those saddled with big mortgages, it may well be an unaffordable increase, making it difficult for them to make ends meet.
“Lenders are worried about a further downturn in prices and are introducing these changes to protect themselves, as well as borrowers. But hard-pressed homeowners may find it’s an extra cost too far.”
Interest-only mortgages are one way borrowers can reduce their monthly mortgage repayments - but those who took this type of mortgage several years ago may now be paying a heavy price.
This is because banks were tightening their lending criteria much more on interest-only deals amid fears of borrowers defaulting on their loans.
A spokesman for Santander said: “If a customer wishes to move, or 'port', their mortgage to a new property we will treat it as a new application. Santander currently only offers interest only mortgages to people with at least a 25 per cent deposit. If someone doesn't have this and wants to remortgage with us or move their mortgage to a new property we will decline the application unless the customer switches to a capital and repayment mortgage. We do have a case by case exceptions process in place where this is not possible and we will consider extending interest only deals providing we are happy the customer will be able to repay the capital at the end of the loan. It is not in Santander's or our customer's interest for them to be unable to do so.”
Santander is one of several high street lenders which have introduced the new rules for borrowers with interest-only deals. Halifax is also understood to applied changes.
Borrowers without sufficient equity in their homes are being moved onto repayment deals once their initial deal has come to an end.
Banks said the move was part of “prudent” lending during the economic downturn and are unable to rule out imposing a further squeeze on borrowers in the months ahead.
It comes amid concerns that the housing market is heading for a double dip as economists predicted that home owners could lose the equivalent of more than the average salary off the value of their homes.
Nationwide reported house prices dropping 0.9 per cent in August, following a 0.5 per cent drop the previous month.
Santander told The Daily Telegraph that customers with less than 25 per cent equity in their home would be moved onto a capital repayment basis.
It means that even if the rate they are currently paying does not rise, a borrower with a typical £150,000 would pay an extra £390 a month. This calculation is based on the borrower paying a mortgage rate of 3 per cent.
Melanie Bien, of mortgage brokers Private Finance, said: “For home owners with interest-only mortgages, a forced switch onto a repayment deal by their lender at the end of their fixed or discounted period would lead to a significant rise in their monthly payments. For those saddled with big mortgages, it may well be an unaffordable increase, making it difficult for them to make ends meet.
“Lenders are worried about a further downturn in prices and are introducing these changes to protect themselves, as well as borrowers. But hard-pressed homeowners may find it’s an extra cost too far.”
Interest-only mortgages are one way borrowers can reduce their monthly mortgage repayments - but those who took this type of mortgage several years ago may now be paying a heavy price.
This is because banks were tightening their lending criteria much more on interest-only deals amid fears of borrowers defaulting on their loans.
A spokesman for Santander said: “If a customer wishes to move, or 'port', their mortgage to a new property we will treat it as a new application. Santander currently only offers interest only mortgages to people with at least a 25 per cent deposit. If someone doesn't have this and wants to remortgage with us or move their mortgage to a new property we will decline the application unless the customer switches to a capital and repayment mortgage. We do have a case by case exceptions process in place where this is not possible and we will consider extending interest only deals providing we are happy the customer will be able to repay the capital at the end of the loan. It is not in Santander's or our customer's interest for them to be unable to do so.”
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Comments
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i didnt pick up that the customer is to be forced onto it, i read that if the customer makes a new application (either by moving, or porting or applying for a mortgage), then they can only have intrest free if they have 75% ltv
is that right0 -
Borrowers without sufficient equity in their homes are being moved onto repayment deals once their initial deal has come to an end.
I'd be very worried if I was on IO with no equity. But I suppose well have to wait for more details it's hard to see exactly what this means.Debt Is Slavery.0 -
Their policy sounds no different to RBS/Natwest.0
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good news, a return to more sensible lending:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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According to a similar article in Sunday Times, it only applies to borrowers who are either moving lenders or want to sign up to a new deal with their existing lender. For those on a current deal or at the end of a deal and moving to their lenders' SVR there is no change.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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Henry_P_Chester wrote: »I'd be very worried if I was on IO with no equity. But I suppose well have to wait for more details it's hard to see exactly what this means.
How would you feel about IO and NE? :-/0 -
I feel that this and other strong measures should be in place. It was ridiculous that banks were allowing people to borrow out of there means, although I believe we all deserve a chance every now and then. Good luck to anyone finding it difficult, believe in turning it round and think positive, there are many who will support you on here."Do not let what you can't do interfere with what you can do."0
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