Halifax, part of Lloyds Banking Group, Britain’s biggest mortgage lender, is rumoured to be planning to ease restrictions on the availability of controversial interest-only mortgages.
The bank could double the limit on new interest-only loans from £500,000 to £1m in the coming weeks.
A year ago Lloyds Banking Group became the first big lender to restrict the availability of interest-only loans, which require the borrower to repay interest but not capital each month, prompting similar moves by rival lenders.
Borrowers who wanted to take an interest-only deal were charged an extra 0.2% on their payment rate and were limited to loans up to £500,000.
Mortgage experts said the move hit wealthier borrowers receiving an irregular income, including bonuses, who prefer interest-only deals so they can pay off the capital in lump sums.
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About one in five homeowners are estimated to be on interest-only deals, which were popular at the height of the credit crunch.
A £200,000 mortgage with an interest rate of 4% costs £1,056 a month on capital repayment basis, but just £667 on interest-only.
Lloyds said that “it does not comment on speculation”.
Ian Gray of largemortgageloans.com, the broker, said: “It makes sense for Halifax to bring back interest-only lending for above-average loan sizes. These borrowers tend to have a high disposable income and other cashflows that can be used to fund repayment vehicles, such as endowments, Isas or private pension investments.”
A decision to reverse the restrictions would come after the Financial Services Authority said that it was not planning to ban interest-only deals as part of its mortgage market review. In its business plan released last week it admitted that interest-only deals were “an appropriate method of finance” for some borrowers.
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Last week Halifax raised the minimum deposit borrowers must hold to get interest-only deals from 15% to 25%, bringing it in line with other lenders.
A report from the Bank of England released last Thursday found that lenders expect to boost the number of mortgages approved over the next three months, including those that require only a small deposit. However, the credit conditions survey also reported that demand for mortgages from homebuyers had contracted markedly in the past quarter.