Banks cut LTVs on Interest Only mortgages

We've seen before how a trend can spread in banking. Just last month we noted that the rise in SVRs from RBS & HBoS could lead to others following suit and, sure enough, before too long we saw Bank of Ireland wade in with a 1.5% SVR rise and others are also due to follow suit soon. It seems that once one Lender can make a change like this that detrimentally affects the lending market and survive the negative PR that goes with it, it makes it easier for theirs to follow as it is by then "old news" and doesn't get as much publicity. We are therefore keenly watching the latest trends in the Interest Only mortgage market. It came as a bit of a shock last month to learn that Santander had decided to lower the LTV it accepts on new Interest Only mortgages from 75% to 50% - quite a dramatic move - and they were quickly followed in this by Leeds BS, Yorkshire Bank and Halifax. Now today we learn that Nationwide, the UK's biggest mutual lender, have also decided to cut theirs to the same level. Once again we find ourselves thinking this is the beginning of a trend and it does perhaps bode poorly for choice in the mortgage market. Indeed, this is not even idle speculation on our part that Nationwide are following a trend as they even announced the move was "in response to changes made by other Lenders" so the motive is quite clear. As a result we expect to see many more Lenders follow suit. The Interest Only mortgage has long been under threat. From the Endowment mis-selling scandals of the 1990s where people were poorly advised about providing to repay Interest Only mortgages through to the more recent credit crunch and associated house price fall, there have always been questions about the prudence of such lending. It has always been a favourite of the Buy to Let market in the UK with the view being that the rise in property prices would more that meet the principal repayment when it fell due. Now we all know differently about this logic so perhaps these latest moves are actually a step forward as they advance the cause of responsible lending and that can only be good for the banks and ergo the economy in the long run. Whatever your view, the trend doe now seem to be in place. If you are looking for an Interest Only mortgage it seems one would be well advised to get the application in early because, as they say about all the best sales, when they're gone, they're gone. At Choice Loans we can refer you to one of our panel of Mortgage experts who can advise you on your options. Either complete the application for on our Mortgage page here or call us on 0845 1260350.