The changes, which take effect from 21st 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, available from Monday, is called the “Low Start Mortgage”, and combines the lower payments of Interest Only with the long-term security of Repayment (capital & interest).
Borrowers take a mortgage with an initial 3-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 Low Start Mortgage addresses a need within the market, while appreciating the need to ensure repayment of the capital. Recognising the unique and quite specific nature of the Low Start Mortgage, it will be launch to the mortgage broker market only in the first instance.
Low Start Mortgage Product Details:
- Available through mortgage brokers only
- Maximum loan amount £1million
- Maximum LTV 80%
- 3 years at Interest Only reverting automatically to Repayment for remaining term
- Normal underwriting and eligibility applies
- No separate repayment strategy required
The 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 – this applies to both Clydesdale and Yorkshire Bank brands. Clydesdale will continue to offer Interest Only mortgages through Private and broker channels for loans between £300,000 - £1million. Where loans are over £1million, Interest Only may be available for “part and part” lending up to 60%LTV.
Fred Sharp, head of mortgage distribution at Clydesdale Bank, said:
“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.
“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.”
