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TSB Interest-only change

Journalist:

ended 08. December 2023

TSB have today changed their interest-only criteria, and now accept the sale of the property as a repayment vehicle. Albeit with conditions. 

Is this a good move? 

Will it bring in more business or are the conditions too strict to make a significant difference?

Should interest-only be more obtainable or have people not learned from past mistakes? 

Here’s a summary:

  • Sale of the security property now acceptable - minimum £300k equity and maximum 60% LTV* (up to 75% LTV if part repayment, part interest only).
  • Up to 75% LTV for all other repayment vehicles.
  • Maximum term 30 years.
  • Maximum age at the end of the term is 70 or the applicant’s anticipated retirement age (whichever is lower).
  • Minimum income £75k sole or £100k joint.
  • Private pension accepted as repayment security based on projected lump sum*.

12 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
Any interest only offering is welcomed as different people have different plans and objectives. It isn't designed for everyone and TSB's new policy puts them pretty much on the similar playing fields to the other mainstream lenders.
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Mike Staton
Director at Staton Mortgages
Congratulations to TSB for joining the 21st century when it comes to interest-only mortgages. Perhaps they will want to continue to look at further common-sense improvements and allow customers to consolidate credit card debt to ease the current cost of living burden on customers, instead of discriminating against this kind of debt and throwing the clients on to the "sorry i cant help you" pile
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Simon Bridgland
Director at Charwin Private Clients
I can’t see it’s anything new to shout about, this type of offer has been about in the market for a while now. Lenders need to offer this to those on lower incomes. The criteria generally makes sense but the high income required excludes those that need the help right now.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
This is a move in the right direction from TSB to bring them more inline with the rest of the market on Interest Only. Granted this is still more restricted than their competitors, but with so many residential interest-only mortgages being based on selling the property to repay the mortgage as the repayment plan, TSB were likely doing very little interest-only business prior to this change.
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Aaron Strutt
Product and Communications Director at Trinity Financial
Interest-only particularly with the sale of the property as a repayment vehicle is an appealing option to many borrowers especially at a time when mortgage rates are higher.
So many of the big banks and building societies offer interest-only now and there is a lot more choice in the mortgage market. The larger lenders generally have minimum equity and higher minimum income requirements, as they try to attract higher earners. For many part and part is the more sensible option as at least some of the debt is being repaid.
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Steven Hargreaves
Mortgage and Protection Adviser at The Mortgage Co
Whilst rates are higher than they were a couple of years ago, and we have many existing clients coming off low Fixed rates, the interest-only option is and will continue to be a particularly useful tool, as it ensures clients that have larger joint incomes, or large amounts of equity can avoid significant price increases in their monthly repayments.
Like anything, it is not a one-size-fits-all all approach, however, for the right clients, it is very useful.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
It is a positive move to provide interest only more readily to people who it's perfectly appropriate for. I think it would be useful to see interest only available to those on lower incomes who might be asset-rich but cash or income poor - something which has been hard to accommodate in thedecade since the Mortgage Market Review.
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James Bull
Mortgage Broker at JB Mortgages
This is a welcome development from TSB although it is not really anything too differential to what other lenders are offering, so i dont foresee it making a huge difference in the scheme of things.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Whilst still quite restrictive, it is good to see TSB move toward the rest of the market in regard to its interest-only criteria. It's not starting, or even chasing, a breakaway with this change but it's moved back into the peloton at least, rather than being dropped off the back.
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Luke Thompson
Director at PAB Wealth Management
These changes just bring them roughly in line with some of the other major lenders so I'm not too sure it will move the needle too much in relation to interest only.

They are obviously trying to appeal to people in the south-east of the country with the criteria as £300,000 equity and £100,000 income for a joint application is not achievable in most of the country.

I do feel it is encouraging that lenders are starting to look at their interest-only criteria though. In an era of high interest rates and for the right customer interest-only is a tool which many mortgage advisers would like to have available to them.
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Charles Breen
Founder at C B
Their criteria is still horiffically limiting to the average person who was sold ( mis-sold in my openion) an interest only mortgage, for people who are stuck with their term running out looking for options this will not be much solace. Another example of a lender wanting to say they provide a comprehensive range of products and have flexible lending criteria but as soon as you look closer you see its still a turd of a product
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Peter Stamford
Mortgage Expert at Stamford Home Finance
TSB's move to adjust their interest-only mortgage policy is a step towards market norms, but it's not groundbreaking. For some, especially those with higher incomes or substantial equity, this option can ease the strain of rising rates. It's about time TSB caught up with the times, though their criteria still seem a bit narrow, missing the mark for the average borrower. It's good to see lenders revisiting their policies, but there's still a long way to go to make these options genuinely accessible and helpful for everyone.