With the current financial climate many home owners are opting to switch their repayment mortgages to interest-only mortgages as a way to be able to make ends meet. It’s often a last resort for home-owners who can’t afford to make the full payments on their mortgage.
However the option of switching to interest-only mortgages is no longer open to customers of Lloyds TSB and their mortgage provider, Cheltenham & Gloucester.
This news emerged from Lloyds TSB on the back of an increase in repossessions over the three months from April-June, by 71%.
With a mortgage of £150,000, switching from repayment to interest-only could save a borrower over £200 per month on their mortgage payments. With the cost of living rising constantly this represents a lifeline for many homeowners.
The new policy was introduced by Cheltenham & Gloucester just one week after Prime Minister Gordon Brown introduced new procedures to ensure that mortgage lenders examined every possible alternative before attempting repossession of a home.
A spokesperson for Cheltenham & Gloucester stated:
Existing customers with their lending on a repayment basis can no longer switch their payment method to interest only.
Frances Walker, part of the debt charity Consumer Credit Counselling Service, stated:
This is not in the spirit of the new scheme announced by the Government last week.
Lloyds TSB however appeared to back track on the move, with a spokeswoman stating that interest-only mortgages are still an option for those in financial difficulty:
If a customer is in financial difficulty, then switching to interest-only will still be an option.