One bank is extending the maximum term of its interest-only mortgages to 40 years.

From Tuesday, April 9, it will increase the maximum term of interest-only mortgages, bringing it in line with capital and repayment agreements, from 25 years.

Under the restructuring, customers applying for an interest-only mortgage must have at least £300,000 of equity in their property if they plan to later sell their property as a way of repaying the mortgage. This amount was previously £250,000.

The bank will also make additional updates to its affordability calculations due to changes for the new 2024-25 tax year.

Santander will take child benefit into account for those earning up to £60,000, while reducing National Insurance contributions for PAYE (pay-as-you-go) and self-employed claimants, after raising the threshold for high-income child benefit. Make people borrow more money.

For homeowners’ mortgages between £1,000,000 and £2,000,000, Santander is increasing the minimum LTV (loan-to-value) ratio from 75% to 85%.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “It’s positive to see lenders reviewing affordability criteria rather than just mortgage rates. It’s likely there are borrowers struggling to get a new loan if they can’t afford to switch deals , they currently spend a significant portion of their net income on mortgage payments.

“Interest-only mortgages can help those who can afford to pay off the principal of their loan at the end of the loan, but it is always wise to seek advice before entering into any arrangements to ensure it is the most suitable option.

“It’s been a bit of a slow start for mortgage rate activity in April, but if fixed rate mortgages are to be canceled soon, there will undoubtedly be many borrowers seeking new loan deals.

“Innovation in the mortgage market or a sensible relaxation of affordability criteria to help support new and existing homeowners will undoubtedly be welcomed.”