RBS tightens interest-only criteria

The Royal Bank of Scotland has changed its interest-only criteria, and now they will only be sold on an advised basis.

An RBS spokesperson confirmed that the changes came in to effect yesterday. Interest-only mortgages could be regarded as a riskier type of mortgage and that could be why the bank’s new criteria means clients have to be advised through a mortgage adviser.

A mortgage adviser would ensure that a repayment vehicle is in place for the customer and would ensure that they fully understand this type of mortgage.

Previously, the Financial Services Authority told FTAdviser’s sister title Financial Adviser that despite lenders withdrawing from the market and imposing increasingly restrictive criteria, lenders need to make an “informed judgement” regarding interest-only as it is not suitable for everyone.

In the regulator’s final Mortgage Market Review paper, released in March, the FSA said lenders should obtain evidence of a borrower’s repayment strategy and lend only where the borrower has the potential to repay the mortgage, as far as it is reasonably able to assess.

In March, NatWest said it was temporarily suspending interest-only options on residential mortgages in the NatWest Intermediary Solutions core.

A spokesperson for the bank said: “With effect from 01 October 2012, interest only mortgages will be offered on an advised sale basis only. In line with our peers, we will require any customer applying for an interest only mortgage to provide evidence of their repayment vehicle. The advised sales process enables us to fully understand the customer’s circumstances before making an interest only recommendation”.