Next week will see history made in the mortgage market.
From next Tuesday the Co-operative Bank and Britannia Building Society will no longer offer mortgages on an interest-only basis.
Customers will now only be able to take out mortgages on a capital and repayment basis.
The lender says it expects the changes being proposed in the Mortgage Market Review will result in all customers who apply for a mortgage being assessed on the basis that they can afford a capital and repayment loan, which is why it has made the decision to only lend to customers on a capital and repayment basis moving forwards.
Existing interest-only mortgage customers are able to switch to any open product for the same amount of borrowing on an interest-only basis when they come to the end of their deal.
In addition they will also be able to take their interest-only mortgage with them should they move home.
The above changes will also apply for mortgages offered through Platform, the dedicated intermediary lender for The Co-operative Bank.
In the case of Platform, the majority of its lending is focused on buy-to-let and volumes of mainstream and almost prime interest-only applications are low. It also believes demand for interest-only loans will continue to fall.
As a result, the lender says the cost of changes that it would want to make in order to comply with future regulations and meet its high standards as a responsible lender cannot be justified. It has therefore also taken the decision to withdraw interest-only lending for new residential lending and additional borrowing on residential interest only loans.
Platform will continue to offer interest-only as a payment option for buy-to-let, as the rent on the property is typically used to make monthly repayments and the value of the property is used as the repayment vehicle for the mortgage.
Well it had to happen eventually – the question is of course , whether others will follow suit this time as well....only time will tell.
As always thanks for your attention.
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