Lloyds tightens interest only rules for landlords

Lloyds tightens interest only rules for landlords

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Lloyds tightens interest only rules for landlords

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.”

Comments

Julian Dayment

6 years ago

Had a meeting with Lloyds TSB yesterday and they advised a limit of no more than 3 buy to let mortgages (recently reduced from 9). I am a 1A category long standing client and this applies to everyone. They advised that they did not see buy to let mortgages as core business.

Ian Ringrose

6 years ago

Is that 3 with them, or 3 with any lender?

Mark Alexander

6 years ago

Hi Ian, it's been like this for a while now. The rule is that a borrower can have no more than 3 buy to let mortgages across the entire Lloyds TSB group. The group includes BM Solutions, Halifax, Bank of Scotland, C&G, Scottish Widows, and several others. Sadly, the monopolies commission were over-ruled at the height of the credit crunch when Lloyds and HBOS were allowed to merge. At the time they were responsible for 60% of all buy to let lending. When Mortgage Express and others pulled out and they started putting these restrictions in place that was a major cause of the paralysation of the UK property market in my opinion.

The restrictions have been in place since October 2010. I've linked below to an article we wrote at that time

http://www.property118.com/index.php/buy-to-let-lending-restrictions-hamper-landlord-borrowing-however-quality-funding-lines-are-well-and-truly-open-to-landlords-with-substantial-cash-or-equity-reserves-learn-how-to-find-out-whos-le/229/

Steve Evans

6 years ago

£50,000 equity on each house?. Have the policy makers ever  set foot outside the south east of England . In  the rest of the country the most common rented houses[3 bedroom terrace or semis] often cost less than £100,000 and never more than £150,000. As in the old days when they would not lend against  houses worth less than £40,000 [This prevented lending on the bottom  50% of the houses in  my town until  the early 1990's]prudent landlords in the North and Midlands are bring discriminated against.In my area you can buy a 4-5 bedroom house for  just over £200,000 but the rental return would be only 60% compared to a similar  3 bed L A House.    

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