The changes will apply to all new interest-only and part interest-only mortgage applications and further advances.
The bank will no longer accept cash savings as a repayment vehicle but will still take longer-term repayment vehicles.
From tomorrow Lloyds will only lend up to 80% of the value of stocks and shares at their current value.
If a borrower has £100,000 valued in shares, Lloyds will therefore only be able to provide an £80,000 loan.
Lloyds will also require a minimum current value of £50,000 for this to be accepted.
For use as a repayment vehicle, pension savings must have a current fund value of over £1m where only 25% can be used toward the value of the property.
The policy changes do not apply to product transfers, transfers of mortgaged property and there is no change to the maximum loan to value of 75% on interest-only.
Lloyds said the move was part of an on-going review of interest-only which began in May 2010 but confirmed “recent changes in the market” prompted this swift action.
Brokers received a note about the move earlier today.
Customers will be able to use a combination of Lloyds’ acceptable repayment vehicles above of mix and match the acceptable repayment vehicles to reach the minimum £50,000 acceptance criteria.
The exception to this is for sale of other residential property which must have a current equity of over £50,000.
A spokesman from Lloyds said: “We review interest-only criteria and risk controls on an ongoing basis. Following recent changes in the market for interest only mortgages, we have updated the policy for acceptable repayment vehicles.
“The updated criteria, which will apply from Thursday 16 February, will ensure that all interest only borrowers are in a position to repay their loan in full at the end of the term, in line with our responsible approach to this type of lending.”
