Lloyds Tighten Interest Only Loans

by Mark Johnston

A tightening of interest only deals form Lloyds has been announced recently.  BM Solutions, part of the Lloyds banking group is now requesting that borrowers prove their repayment plan if they wish to take out an interest only mortgage deal.  This forms part of the Lloyds strategic review and new strategy going forwards.  They have reduced the maximum loan to value for interest only deals to 75 per cent and have restricted lending to less than £500, 000. 

These changes mean that any borrower wishing to borrow on an interest only basis will need to provide evidence, to BM Solutions, of how they intend to repay their loan.  The strict criteria must be met before the lender will even consider the application for interest only.

The recent Independent Commission on Banking (ICB) may force the Lloyds Banking Group to sell quite a lot more of their business than the group had planned for and had anticipated per regulation.  This may happen in order to ensure the competitive nature of the British banking market. 

Lloyds Banking Group Plc, the biggest mortgage lender in Britain, is poised to change the face of the banking network forever in the next few days.  Lloyds have solicited the help of the investment giants Citygroup Incorporated and JP Morgan Chase & Co. to help find buyers for about 600 branches that Lloyds have to sell. 

Lloyds were bailed out in 2008 with an injection of tax payers money to the tune of £37 billion which was quoted as being an “absolute humiliation” by a BBC boss at the time.  They are now 41 per cent owned by the current UK coalition Government. 

The highest bids are likely to come from the National Australian Bank and Sir Richard Branson’s Virgin Money.  The sale of these branches is required by the European Union regulators.

Private discussions have revealed that the sale is due to generate somewhere in the region of between £2 billion and £3 billion on the market and accounts for about 5 per cent of the U.K’s checking account market.  The sale must go ahead, according to the stipulation of their bailout, by the end of 2013 in order to comply with the terms and conditions.

The new chief executive, who took office on the first of March has been quoted as saying “We made the decision to accelerate the start of the sale process in order that we met the timescales agreed with the government and EU,” Horta-Osorio said in the statement. “By doing this we also bring greater certainty and clarity for our colleagues and our customers.”  This decision was made within 10 days of taking up his new post. 

These new rules will not effect buy to let mortgages and will be introduced over the next coming months

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