The changes, which take effect from 21 January, will see the launch of a unique mortgage product and a rationalisation of how interest only mortgages are offered by Clydesdale Bank.
The new product is called the Low Start Mortgage, and combines the lower payments of Interest Only with the long term security of a repayment capital and interest loan.
Borrowers take a mortgage with an initial three year fixed rate loan on Interest Only terms, at the end of this the loan reverts to Standard Variable Rate on Repayment terms for the remaining life of the mortgage.
The lender said that the Low Start Mortgage addresses a need within the market, while appreciating the need to ensure repayment of the capital. Initially it will only be available through mortgage brokers and the maximum loan amount is £1million, the maximum LTV 80% and normal underwriting and eligibility applies. No separate repayment strategy required.
Under wider changes the Bank’s approach will see all other Interest Only loans offered only through mortgage brokers and Clydesdale’s Private Banking channel. Interest Only mortgages will no longer be available through retail branches and direct at both Clydesdale and Yorkshire Bank brands.
Clydesdale will continue to offer Interest Only mortgages through private and broker channels for loans between £300,000 and £1million. Where loans are over £1million, Interest Only may be available for part lending up to 60% LTV.
‘There is a clear need for interest only mortgage products in the marketplace, but this has to be in the right circumstances and with the right support financially and advisory,’ said Fred Sharp, head of mortgage distribution at Clydesdale Bank.
‘Our new approach addresses both the need and the concerns associated with Interest Only mortgage lending; we have retained the option while controlling the availability, and launched a new product that takes the best of both interest only and repayment mortgages to support borrowers looking for a new home,’ he added.
