Santander will offer 40-year interest-only mortgages among a range of moves that loosen its lending criteria next week (9 April).
The high street lender says it will lift the maximum term it offers on interest-only mortgages to 40 years, from 25 years, in line with its capital and repayment mortgages.
It will also allow applicants with a combined overall income of £200,000 or more to access up to 75% LTV products, rather than requiring a single applicant to earn at least £250,000.
Customers applying for an interest-only mortgage, who also intend to sell their property later as their way to repay the mortgage, must also now have at least £300,000 equity in the property, previously this was £250,000.
Also, the bank will take child benefit into account for those earning up to £60,000 following the increase to the high-income child benefit charge threshold, as well as the reduction in national insurance contributions for PAYE and self-employed applicants.
Finally, on residential fixed-rate larger loans, all mortgages between £1m and £2m will see the minimum loan to value rise to 85% from 75%.
Santander head of development, mortgages, Graham Sellar says: “Home ownership is a key focus for many, but affordability can often be people’s Achilles heel.
“Today’s changes, including opening up interest-only products for more people, while reflecting recent tax changes that improve people’s take-home pay in our affordability calculations, aim to address this and support more homeowners.”
John Charcol head of marketing Nicholas Mendes adds: “With swap rates unlikely to see any significant movement until the next rate bank rate cut it’s a prime moment for lenders to tweak their criteria to increase their competitiveness in the current market.
“While interest only isn’t a new phenomenon, a 40-year interest-only loan sees Santander jump up the pecking order over other high street lenders, such as Nationwide, where the maximum term in interest only is 25 years.
“Unfortunately, the minimum income requirement is likely to be a barrier for the typical mortgage holder looking to take advantage of such a deal.”
