Anyone showing even a small interest in the mortgage market will have read about how things have tightened up in the last few years, making it harder to get a mortgage. One area that continues to see lenders getting tougher on borrowers is that of interest only mortgages.
Lenders across the market have already tightened up on interest only mortgages with the majority imposing a maximum of 75% of the property value for those opting for an interest only repayment structure. In addition lenders have shortened the list of acceptable repayment vehicles with the vast majority removing methods such as cash savings, inheritance and overpayments.
Recent moves have seen these conditions get even tougher. Santander will now only allow interest only up to 50% of the property value and Halifax imposes stiff requirements on repayment vehicles to be accepted. For example to use a pension the current pot must be in excess of £1 million.
These changes will only make life harder for those borrowers that have opted for an interest only mortgage and a move of home or remortgage could force a radical rethink of repayment strategy. Even if a borrower has assiduously made payments into an investment vehicle over the years but cannot meet the loan to value requirements will potentially need to restructure their method of repayment.
The clear message is that although interest only mortgages are likely to remain available, repayment mortgages look set to make up an even larger majority of the mortgage market in the future.