Interest only Woolwich mortgage products now has a 'plausibility' check.

With immediate effect, all interest-only Woolwich mortgage products have had their lending criteria tightened with the introduction of a “plausibility” check. The check has been designed to make sure that projected borrower repayment plans will easily cover the final repayment of the mortgage agreed.

The change which was brought into effect on January 23, now means interest-only Woolwich mortgage borrowers are now asked for written evidence outlining the details of the proposed repayment plan. The FSA’s last market review for mortgages proposed that lenders have to assess interest-only loans on both an interest and capital basis, unless the borrower has a easy to understand and believable proposal on how they intend to repay the debt at the end of the term.

The Woolwich, who are an intermediary of Barclays, advise they will not accept borrowers projected investment growth, when making an assessment as to the amount to be lent on interest-only mortgage basis.

Deal Direct are concerned that the change will lead to the lender declining a large percentage of remortgage requests from borrowers who are currently on interest-only products. Borrowers with interest-only Woolwich mortgage deals may now be pushed into either remortgaging or expensive loan alternatives including second-mortgage deals or even unsecured loans.

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