Yorkshire Building Society introduces interest-only mortgages
Yorkshire Building Society will now offer interest-only repayment options to mortgage borrowers.
Interest-only deals will be available to new and existing borrowers looking for loans of up to 75 per cent of the property’s value (known as loan to value, or LTV). They also need to show they could afford to repay the loan on a capital and interest basis.
In addition borrowers will need to demonstrate an acceptable repayment strategy, which may include the sale of the property at the term end, so long as the amount borrowed does not exceed 50% of the property’s value, and there is a minimum of £200,000 equity within the property.
Charles Mungroo, senior mortgage manager at Yorkshire Building Society, said that as demand has increased and other lenders have returned to the market, it made sense to review the mutual’s approach to interest-only borrowing.
He noted that the lender had designed its interest-only options to reflect the needs of borrowers, while also putting the emphasis on being responsible.
He continued: “Borrowers are increasingly looking for interest-only repayment methods and we believe this is likely to continue growing as those who make an informed choice that it is right for them, can maximise the benefits interest-only offers and manage their money more flexibly.
“The regulatory environment has changed a lot since we last offered interest-only, and with a responsible lending criteria that reduces risk for both customers and the society, interest-only can be a welcome and more suitable repayment option for some borrowers.”
Data from Moneyfacts earlier this month suggested there has been a significant increase in the number of interest-only mortgage deals available, having almost doubled in the last five years.
However, mortgage brokers suggested that some borrowers have been “brainwashed” against interest-only, arguing that an increase in product numbers did not necessarily represent a similar increase in demand for the deals.