Santander overhauls interest-only loans

Thrugelmir

Seems if banks are become self regulating and returning to traditional conservative lending practices.

Santander has overhauled its lending criteria for interest-only mortgages, cutting the maximum it will allow customers to borrow on an interest-only basis from 75 per cent to 50 per cent loan-to-value.
The changes, which will come into effect from Friday, will see Santander impose some of the strictest rules on interest-only mortgages - a part of the mortgage market that has come under close scrutiny after the city regulator warned that homeowners were using them to borrow more than they could afford.

Under the bank’s new criteria, individuals will only be able to borrow a maximum of 50 per cent of the value of their property on an interest-only basis. Any borrowing above this loan-to-value will have to be taken on a capital and repayment basis. Existing interest-only borrowers that are moving home will also be impacted as they will have to meet the new criteria, or switch to a repayment mortgage.

http://www.ft.com/cms/s/0/73a7e85c-5247-11e1-9f55-00144feabdc0.html#axzz1lpiCGT7E

shortchanged_2

More good news for housing market.

Thrugelmir

shortchanged wrote: »

More good news for housing market.

Bad news for those looking to remortgage.

Graham_Devon

Thrugelmir wrote: »

Bad news for those looking to remortgage.

It is, but it could be a rather unique case, whereby existing homeowners find themselves in the same position and non, but aspiring homeowners. They find themselves all of a sudden priced out.

That is, only, of course, if they couldn't afford a repayment mortgage in the first place, hence having interest only. Afterall, they can always remortgage to a repayment mortgage. If they are unable to afford that, then it's the same boat as so many others.

Thrugelmir

Graham_Devon wrote: »

It is, but it could be a rather unique case, whereby existing homeowners find themselves in the same position and non, but aspiring homeowners. They find themselves all of a sudden priced out.

That is, only, of course, if they couldn't afford a repayment mortgage in the first place, hence having interest only. Afterall, they can always remortgage to a repayment mortgage. If they are unable to afford that, then it's the same boat as so many others.

I think you have to look at this decision in light of the growth of interest only mortgages in the 00's. Combined with a lack of payment plan.

If lenders are going to have conduct annual reviews of repayment plans. Thats very time consuming and therefore costly.

Far easier to offer repayment products to mainstream customers.

Conrad

Got scuppered by this today. 59 yo wanting to raise a mortgage on her mortgage free home in order to help son who's working in Canada, buy a home in the UK, which he cannot as he has been abroad a few years.

She was going for an 11 yr I/O mortgage and in reality her Son was to pay the mortgage. On returning to the UK he was at some point going to raise a mortgage against the house being bought now and pay Mum off.

An 11 yr repayment mortgage is not affordable, so we're trying elsewhere.

RenovationMan

Seems excessive to reduce the maximum LTV to 50% but that's the way of all knee-jerk reactions. It doesn't really make much difference as existing mortgage holders will look elsewhere or will already have an LTV lower than 50%.

My mortgage is an IO with Santander and I haven't heard a peep from them. I assume a mailshot to their customers will be winging its way at some point.

Kennyboy66

Conrad wrote: »

Got scuppered by this today. 59 yo wanting to raise a mortgage on her mortgage free home in order to help son who's working in Canada, buy a home in the UK, which he cannot as he has been abroad a few years.

She was going for an 11 yr I/O mortgage and in reality her Son was to pay the mortgage. On returning to the UK he was at some point going to raise a mortgage against the house being bought now and pay Mum off.

An 11 yr repayment mortgage is not affordable, so we're trying elsewhere.

what a splendid idea - put mum in debt so son, who no doubt had amply opportunity to save in a country with plenty of well paid work and a strong currency, can get on the housing ladder.

Nice fees for the advisor ?

CRASH_BANG_WALLOP

this is just the start the dudes in the banks will scrap IO forever

wotsthat

How many new loans are IO?

I'm slightly surprised at this story as I thought that if mortgage lenders are picking and choosing customers they'd be picking those with a repayment plan in place.

Are they just 'going public' with what has been policy for some time?

StevieJ

RenovationMan wrote: »

Seems excessive to reduce the maximum LTV to 50% but that's the way of all knee-jerk reactions. It doesn't really make much difference as existing mortgage holders will look elsewhere or will already have an LTV lower than 50%.

My mortgage is an IO with Santander and I haven't heard a peep from them. I assume a mailshot to their customers will be winging its way at some point.

I got a great deal off them in 2004 when I switched my mortgage, BR+.25% for two years and BR+0.95% in perperpuity (well till the end of the mortgage), no fees whatsoever. I had to switch my current account, no sweat there Unfortunately I paid a load off when BR was heading for 6%