Lloyds gets cold feet over interest-only home loans

| May 14, 2010 | 0 Comments
”Lloyds

Lloyds Banking Group has reviewed its interest-only mortgage offering and withdrawn the non-repayment option on loans of over £500,000.

The lender, which operates the Halifax and Cheltenham & Gloucester brands, has also upped rates on interest-only loans, which are now loaded with a 0.2% premium.

The end of the house price boom has left banks and building societies nervous of lending on an interest-only basis and tighter criteria at Lloyds mean that new interest-only borrowers can’t base their repayment plans on the sale of the mortgaged property.

Instead, they will need to set up and maintain a savings plan of some kind to repay their borrowings.

In the feedback to the Financial Services Authority’s Mortgage Market Review published in March, the regulator found that most lenders agreed that there is a case for “constraining” interest only loans.

However, the Post Office surprised the mortgage market this week by announcing a new range of deals aimed at first-time buyers.

The lender is not only happy with a minimum deposit of 10% but is also allowing borrowers to choose between an interest only and capital plus interest repayment option.

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