Comment On Lloyds Changes To ‘Interest Only’ Mortgages

News that Lloyds Banking Group have decided to drop ‘Interest only’ mortgages for loans over £500,000 is of no concern to top agents.

The market that Knightsbridge agents W.A. Ellis operates in is almost exclusively over half a million pounds. They sell homes to and for City types, some highly geared and mortgages of over £500,000 are not unusual. 

Richard Barber, partner in the firm’s house sales department says “I think the key to this measure lies in the Loan to Value ratio. Other lenders have a policy of only allowing ‘interest only’ mortgages at an LTV of 66% which strikes me as being far more sensible than simply removing the option altogether”. 

Lloyds Banking Group is now 41% owned by the tax payer after its toxic deal with HBOS left it with a £24bn loss. But Simon Godson, partner in W.A. Ellis, takes a pragmatic approach. “In principle and on paper it makes sense to do this under the banner of “responsible lending” however in reality purchasers options are being squeezed and the choice of mortgage products has dramatically been reduced over the past year or so with a fall from nearly 12,000 at the time of the Credit Crunch to less than 2,000 today”. 

Godson says “It will be interesting to see if other lenders will follow suit and if so at what level but I don’t think that the tax payer should be backing highly leveraged deals. This should be left to specialist lenders who will no doubt be delighted to step in and assist disappointed Lloyds Bank customers”.

Barber concludes “This strikes me as "locking the gate after the horse has bolted" and bonus related borrowers will simply choose lenders with more flexible lending policies who exhibit a degree of trust in their mortgagors”.