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Lloyds tightens criteria for interest-only mortgages

Bank also narrows its list of acceptable repayment vehicles for such loans.

Britain's biggest mortgage lender, Lloyds Banking Group, has announced it will no longer offer customers the option of interest-only repayments for borrowing that exceeds £500,000.

As part of a review of its interest-only proposition, the bank has also narrowed its list of acceptable repayment vehicles for such loans.
While an inheritance or the sale of a house or business will no longer be accepted, the list will retain endowments, pensions, Isas, share portfolios and lump sums.

Lloyds plans to rigorously ensure that borrowers have a firm plan in place to repay their debt, and is likely to contact customers regularly to demand proof that they are building up adequate savings.

While the bank said its intention was to ensure that its products and procedures reflected "the additional risks and responsibilities" involved in interest-only lending, analysts note the move will make it difficult for some creditworthy borrowers to take large loans.

As part of a review of its interest-only proposition, the bank has also narrowed its list of acceptable repayment vehicles for such loans.
While an inheritance or the sale of a house or business will no longer be accepted, the list will retain endowments, pensions, Isas, share portfolios and lump sums.

Lloyds plans to rigorously ensure that borrowers have a firm plan in place to repay their debt, and is likely to contact customers regularly to demand proof that they are building up adequate savings.

While the bank said its intention was to ensure that its products and procedures reflected "the additional risks and responsibilities" involved in interest-only lending, analysts note the move will make it difficult for some creditworthy borrowers to take large loans.