The time is right for Interest Only
With new and innovative products available for Interest Only, the time is right for Intermediaries to reconsider this repayment type to best serve the needs of today’s borrowers writes Mark Collar, National Intermediary Development Manager.
The dynamics of the Interest Only market are changing, primarily driven by regulation and lender attitude. Now offered through fewer providers, with more stringent lending criteria and more robust affordability assessments, the impact of the Mortgage Market Review (MMR) on this type of lending is clear. So if the regulator is comfortable why does Interest Only still generate nervousness?
The answer may be found in the fact that general attitude has not caught up with the number of changes made by lenders still participating in this market. The lenders in the Interest Only market now have criteria and affordability checks in place that are designed to safeguard borrowers. On a basic level if, based on the information provided, the repayment method appears unsuitable, the lender should not allow the customer to proceed. This greater amount of administration means less lenders in the market, leaving consumers with a smaller pool to choose from, but a market with checks in place that are designed to better serve them.
Most importantly, Interest Only is not a one size fits all option, and different products will suit different customers for a range of reasons. That’s why it is vital for intermediaries and lenders alike to be flexible in their approach to Interest Only. We’re addressing this in our own product range, increasing our maximum LTV to 60%, improving our Part & Part offering and refining our equity requirements for borrowers intending to use sale of the property as a repayment strategy.
It’s about creating a more accountable and proactive market. Through responsible lending and new product development, it's vital that lenders lead the way when it comes to enabling brokers to offer their customers more options when it comes to their investments, and Interest Only is just one such option.
Do you have further questions about Interest Only? Our Interest Only expert Mark Collar will be answering questions over Twitter in our Q&A on Thursday 10th November. Tweet us now @LBSIntermediary using #AskLBSIntermediary to get your questions answered by Mark. Questions which are personal or specific to a particular mortgage account or customer or mortgage product will not be answered as part of the Twitter chat session.
For more information about Interest Only or to speak to one of our team about general enquiries or specific cases call 03450 50 5555. We may monitor and/or record your telephone conversations with the Society to ensure consistent service levels (including colleague training).