Best Loans News

Since the effects of the credit crunch hit the home owner loans market, coupled with the proposals made by the Financial Services Authority (FSA) under its Mortgage Market Review (MMR), banks and building societies have been particularly cautious about offering certain types of loan.

Home owner loans such as self certification loans and interest only loans have largely been frowned upon by lenders, as these suggest the possibility of a lack of affordability from the borrower and many have withdrawn from this area of the loans market altogether.

Although the FSA have now relaxed their original position with regard to interest only loans, saying that they will not be banned outright under the MMR rules, a number of lenders are still taking a cautious approach towards interest only loans and are restricting the maximum loan available under this type of borrowing.

Just this week, the Nationwide building society has announced that it is to reduce the maximum which may be borrowed under an interest only home owner loan from 85 per cent, to just 75 per cent loan to value.

This follows a similar move made by the Lloyds Banking Group last week, when they also cut the maximum interest only loan to 75 per cent loan to value on all Lloyds TSB and Halifax products.

The new restrictions on interest only home owner loans will come into effect with both lenders today, Wednesday 6th April, as both lenders continue to take a cautious approach to offering new loans to potential borrowers.

Many other banks and building societies already have this type of restriction on offering interest only loans, whilst many will not even entertain the idea of interest only loans.

A spokesperson for Nationwide said “We have restricted our interest only lending to reflect the current market position.”