NatWest and RBS are to reinstate interest-only mortgages for the first time in around three years. The loans will be available to those earning at least £100,000 per year.
The mortgages will also only be available if customers take a maximum loan-to-value (LTV) of 75%, with further restrictions if the applicant intends to sell their home to repay the loan.
The banks revealed that the mortgages will only be offered on the condition that the applicant has “an acceptable repayment strategy, such a savings or a pension plan, to make sure they are able to repay the capital at the end of the term.”
A NatWest Intermediary Solutions spokesperson says: “Having undertaken a thorough review of the market, we now believe it is appropriate to offer our customers, who meet certain criteria, to take out
interest-only mortgages to purchase their residential properties.”1
The banks’ previous interest-only mortgages, which were taken off the market in December 2012, were available to customers who banked with RBS/NatWest for a minimum of three months and who earned at least £50,000 per year.
This news arrives after Citizens Advice estimated that almost one million people with interest-only loans do not have a repayment plan in place. Read more here: /almost-1m-face-mortgage-repayment-difficulties/
NatWest and RBS reported that they will write to customers throughout the mortgage term to ensure they are on track with their repayment plan.
The banks added that the new mortgages will not be available to customers who plan to repay within three years, if they intend to use the mortgage to consolidate debt, if they are using a Help to Buy or shared equity scheme, or if they live outside the UK or have no right to live in the UK.
Head of Mortgages and Protection at RBS and NatWest, Lloyd Cochrane, comments: “Interest-only mortgages will give our customers more choice and provide additional flexibility in how they repay their mortgage.
“We are re-entering this market due to customer demand and we will keep in touch with our customers to support them to stay on track with repaying their mortgage.”1
Head of NatWest Intermediary Solutions, Graham Felstead, says: “We are delighted to be reintroducing residential interest-only mortgages for brokers and their customers.
“Having undertaken a thorough review of the market, we believe we can help many customers, who meet specific conditions, with their homeownership needs with interest-only mortgages.
“Customers who take this option will need to have approved repayment strategies in place and agree to engage with us during the loan period so that we can support them to stay on track to repay the loan.
“The mortgage market is currently a very dynamic one, which is set to continue on its growth path.
“We have enjoyed great support from the broker market this year and look forward to continuing to help more and more customers with their borrowing needs for the rest of 2015 and beyond.”1
1 http://www.propertyindustryeye.com/natwest-and-rbs-to-re-introduce-interest-only-mortgages/