Virgin Money’s criteria has been all shook up this week, as the lender revealed changes to its interest only criteria across all residential deals. The lender has decided to halve the minimum gross income requirement for its interest only mortgages from £100,000 to £50,000, as well as removing the original requirement for the worth of a property to be at least £500,000.
Including 100% of bonuses and overtime, Virgin Money has also introduced a maximum loan to income multiple of 3.5 for borrowers with both interest only and part to part deals, in a bid to ensure stronger affordability amidst loosening criteria. This applies to all deals that receive a decision in principle (DIP), aside from those already approved on its existing policy.
The new maximum loan to value for Virgin Money interest only mortgages or part to part residential loans now stands at 70%, however, this is not available to first time buyers. Equally, capital raising for debt consolidation will not be permitted on the lender’s new interest only offers.
Believing that interest only remains an appropriate option for many customers, who can demonstrate confidence in repaying a loan at the end of its term with a clearly evidenced repayment plan, Virgin Money reinforced that this does not indicate a change in risk appetite, but rather a tweak to the lender’s policy. On top of this, Virgin Money has also adjusted other factors to its commercial objectives and responsible lending principles, as part of an ongoing product adjustment plan that is due to take course over the next few weeks.
As part of a market-trend of easing customers away from interest only mortgages, this could prove shocking to many borrowers still on interest only deals who will be changing from part to part as they near the end of their fixed term mortgage.