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April 15, 2011 11:58 am
Lloyds Banking Group has increased the amount it will lend on an interest-only basis from £500,000 to £1m for borrowers taking out a mortgage via its branch network.
The bank will be introducing the higher loan cap across its intermediary brands in the coming weeks as part of the group’s ongoing strategic review of its interest-only mortgage products.
Over the past year, Lloyds has made a raft of changes including increasing the price of interest-only loans, tightening its list of acceptable repayment vehicles and restricting the use of interest-only mortgages to people borrowing less than £500,000.
A spokeswoman for Lloyds said it was confident that it now has “robust processes” in place for interest-only, which has allowed it to review its earlier changes.
She confirmed the bank will also be removing its differential pricing for interest-only loans accessed through its branches, and expects this to be rolled out across its intermediary brands in due course. Last March, the group announced it would charge 0.2 percentage points more for an interest-only loan compared to a capital repayment deal.
Earlier this week, Lloyds announced that from Monday it would require all new mortgage applicants via its BM Solutions brand to provide evidence of a repayment vehicle when a new client applies for an interest-only loan.
Currently, Lloyds only requests evidence of repayment vehicles on residential interest-only mortgages offered via its branch network. It introduced these requests for all its Lloyds TSB branch customers in January, and in March for its Halifax branch mortgage customers.
The lender said the next step would be to make sure it has the same approach to interest-only lending across all of its lending channels, including all its intermediary lenders.
“We’ve now got the new process in place in branches whereby we’re checking the repayment vehicles before we offer the mortgage. Because we haven’t got that in place with the intermediary channel we’re not yet in the position to apply the same policies and therefore the £500,000 limit is still in place,” a spokeswoman said.
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