Lloyds tightens interest only rules for landlords

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Lloyds is the latest bank to tighten up interest-only lending criteria following the lead of Santander.

Both banks are significantly restricting interest only borrowing for personal residential mortgages, but leaving buy to let options intact.

However, the new Lloyds restrictions do affect buy to let landlords who mortgage their own homes based on collateral in their property investment portfolios.

The bank will lend up to 80% loan-to-value of a single or multiple buy to let properties as an interest only loan on the landlord’s main residence, provided each property has more than £50,000 in equity.

The bank gives the example of a borrower with another residential property valued at £150,000 with a mortgage of £50,000.

The current equity is £100,000 and using 80% of this is sufficient to cover £80,000 in interest-only lending required for a mortgage application.

The restriction is group-wide so includes Lloyds TSB, Cheltenham & Gloucester, the Halifax, bank of Scotland and Birmingham Midshires.

Meanwhile, Skipton Building Society has launched a new range of buy to let mortgages.

The range includes two, three and five year fixed rates up to 70% loan to value.

Interest rates vary from 3.89% fixed for two years to 4.89% fixed for five years. Most come with a 3245 application fee and completion charges from £750 to £2,250. A five year fixed rate has no application fee and a 2% arrangement fee.

Independent financial firm Defaqto has reviewed the buy to let mortgage market and reckons 28% of the market has arrangement fees under £1,000.

Around 63% of mortgages are fixed rates and 26% trackers.

Defaqto insight analyst for banking David Black said: “This gives a big clue as to the type of mortgages likely to be in greatest demand.

“Buy to let mortgages also have higher interest rates and higher arrangement fees than residential mortgages.”

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