Clydesdale Bank refreshes interest-only affordability assesment

The lender has increased its maximum LTV for part capital and interest (C&I) and part interest-only (IO) loans to 85% for loans up to £1.5 million. Within this structure, up to 75% of the borrowing can be taken on an interest-only basis, with any additional borrowing up to 85% taken on a capital and interest basis. 

Additionally, the lender has removed the 70% LTV restriction that previously applied to downsizing on loans above £1.5 million. Downsizing can now be used as a repayment vehicle up to 75% LTV on an interest-only basis, with any borrowing beyond that threshold taken on a capital and interest basis.

The bank’s new maximum LTVs reflect these broader criteria, with interest-only lending now available up to 75% for loans between £80,000 and £2.5 million, and part & part lending available up to 85% for loans up to £1.5 million. For larger loans, up to £10 million, the maximum LTVs range from 60% to 75%, depending on the loan size and structure.

Clydesdale has also overhauled its affordability assessment for interest-only and part & part mortgages. Rather than assessing affordability as though the entire loan were on a capital and interest basis, the lender now uses the actual repayment type in its calculations. This change could allow clients to borrow more, reflecting a more accurate picture of their financial position. The updated assessment is already live in Clydesdale’s affordability calculator.

Other refinements to the policy include updated rules around debt consolidation and repayment vehicles; the amount of equity required when lending on a second home; and the treatment of repayment vehicles such as the sale of another property, cash savings, and investments.

 Richard Walker, head of intermediary sales at Clydesdale Bank & Virgin Money, commented: “Clydesdale has built a strong reputation for its interest only offering, and brokers consistently tell us their clients appreciate the flexibility it provides. We’re committed to evolving our support to meet customer needs, and this enhancement will give borrowers using interest only or part & part more options to align their mortgage strategy with their broader financial goals.”