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Lenders clampdown on Interest-only mortgages
Photo: ANDREW SHAW
Halifax and Lloyds have become the latest lenders to tighten their criteria on
interest-only mortgages.
It wasn’t so long ago that home owners could simply pick up the phone to their
lender, pay a small fee and switch from a repayment mortgage to an
interest-only mortgage.
The benefits of making such a move are obvious – your monthly repayments fall
dramatically. But the downside is that your outstanding mortgage stays
at the same level.
Lenders effectively put the shutters up on interest-only mortgages during the
financial crisis despite the facility being the best option for workers who
do not get a regular monthly pay cheque.
Some lenders will still allow borrowers to have an interest-only mortgage, but
it will come at a price.
Halifax, the country’s largest mortgage lender, has just added an extra 0.2pc
in fees to its fixed-rate introducer range for borrowers who opt for an
interest-only deal.
In March, it made the same rise with its tracker range, but some mortgage
experts believe that this is just another way of punishing home owners who
are struggling to make monthly payments.
Halifax said the decision, made on products that were only available from a
broker, “made sense from a customer’s point of view to reward those
customers that are doing the more responsible thing by repaying capital”.
Ray Boulger, spokesman from brokers John Charcol, said: “This is a piece
of spin that Alastair Campbell would be proud of. If the repayment rates had
been reduced and the interest-only rates kept the same, then Halifax might
be justified in saying that. But this simply doesn’t wash, because the
repayment rates were maintained and the interest-only rates increased.”
Lloyds has raised the hurdle …
Read the original article at Telegraph
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