Santander is set to increase the minimum equity buffer from £150,000 to £250,000 on its interest-only mortgages.
This increase will only apply where the sale of the mortgaged property is listed as the repayment vehicle.
The amendment will be effective from Wednesday 24 February.
The lender offers both pure interest-only mortgages up to a maximum 50% LTV, and part interest-only, part capital and repayment mortgages up to 85% LTV.
The equity on each type of mortgage will be calculated depending on the product, and for the pure interest-only proposition the £250,000 will be based on the deposit/equity at application.
Meanwhile, for part interest only with part capital and interest, the £250,000 will be calculated on the equity at the end of the mortgage term.
Helen Harrison, head of intermediary distribution at Santander said: “We last reviewed our interest only buffer in 2016, when ONS data showed the average house price stood at around £205,000.
“At the end of 2020, the same data showed the average house price was nearer £250,000. By increasing our IO buffer we are ensuring customers have strengthened resources when they to need to sell-up and downsize to another property at the end of their IO term.”