The UK mortgage market is warning potential borrowers that there has been a sudden surge in the number of mortgage providers lowering how much they will lend for an interest-only mortgage deal.
Nationwide, Santander, and Coventry Building Society are among the mainstream mortgage lenders that have reduced their Loan-To-Value (LTV) ratios on their interest-only mortgages to just 50%.
The announcement comes as little surprise to seasoned property professional who have seen the pattern repeatedly. The reduced LTV values will immediately affect new borrowers, however, changes will come into effect if homeowners need to borrow additional money against the value of their property to fund home improvements, as they will be treated as new loans and the amount will be limited to approximately 50% of the property value
Moneyfacts spokesperson, Sylvia Waycot, said “The development applies to new borrowers only, so anyone with existing interest-only deals at higher LTVs need not worry. However, the end result is that many people who chose an interest-only mortgage because it was cheap, are at their maximum monthly outgoings and will find themselves unable to move should they need to, or borrow for improvements – which means they are in fact under a form of house arrest.”
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