Natwest returns to interest-only mortgage market

Natwest returns to interest-only mortgage market

Natwest Intermediary Solutions will be reintroducing residential interest only mortgages for new business from 21 September.

Customers who want to apply for an interest-only mortgage must earn a single gross annual income of at least £100,000, excluding discretionary bonuses, and have an “acceptable” repayment strategy.

The maximum loan-to-value is set at 75 per cent, with further restrictions put in place if the customer intends to sell their home in order to repay the loan.

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There are also specific circumstances where customers will not be accepted for an interest-only mortgage.

For instance, those who plan to repay their mortgage within three years or want to use the mortgage to consolidate debt or are applying through one of the Help to Buy or shared equity schemes will find their applications for an interest-only loan rejected.

Those who live outside the UK or have no right to reside in the UK will also not be eligible for an interest-only loan from the firm.

Graham Felstead, head of Natwest Intermediary Solutions, explained that after having undertaken a thorough review of the market, they found that many customers still required access to interest only mortgages.

“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.”

David Hollingworth, associate director for communications at London & Country Mortgages, said Natwest’s return to the market was a significant move. “It is the first reversal from a high street lender that had previously withdrawn from interest-only altogether.

He added: “It recognises that interest-only can be a useful product for the right borrower although, as we have seen with other lenders, the income requirements will confine its use to higher net worth borrowers that can demonstrate a robust repayment vehicle.”

Natwest’s step back into the interest-only mortgage market comes after the FCA denied the need for intervention in the interest-only mortgage market despite warnings that 1m mortgage holders face repossession because they have no way of paying off their loans.

Last week research by Citizens Advice estimated that nearly 1m people have interest-only mortgages but have made no arrangements to pay them off when their terms end.