The UK’s largest building society told FTAdviser it did not plan to offer the products, which fell out of favour when it emerged many borrowers had not put in place viable repayment strategies.
Nationwide pulled out of interest-only lending in October 2012, ahead of a regulatory overhaul that limited the availability of the loans.
Yorkshire Building Society (YBS), which is the UK’s third-biggest mutual, also withdrew from the interest-only market in 2013.
The loans are being offered to new borrowers seeking up to 75 per cent loan-to-value (LTV) and who could afford to repay the loan on a capital and interest basis but choose only to pay the interest accrued.
But despite Accord’s claims of rising demand for interest-only products, Nationwide has revealed it has no plans to follow suit.
A spokesperson for the building society said: “Nationwide withdrew from new interest only lending in October 2012, and has no current plans to re-enter this area of the market.
“The society continues to support existing members with an interest-only mortgage through product switching and porting.”
Interest-only mortgages, which require borrowers to pay off monthly interest but not capital, were popular with homebuyers in the years leading up to the financial crisis of 2008.
But many of those who took out the loans failed to put adequate repayment plans in place, leaving them in danger of repossession at the end of their term.
In 2014, regulations were introduced by the Financial Conduct Authority (FCA) to ensure the mortgages could not be sold without a repayment plan, leading to a decline in their popularity.
According to estimates by the Council of Mortgage Lenders – now part of UK Finance – at the end of 2015 there were 1.7 million pure interest-only mortgages outstanding, with a further 500,000 on a part interest-only, part repayment basis.
These figures represent a decline from 2.4 million pure interest-only and 705,000 part-and-part loans that were outstanding in 2012.
The equity release product provider estimates around 10,000 borrowers a year between now and 2020 are set to reach the end of interest-only loans with either a projected shortfall from their repayment strategy or no strategy at all.
A spokesman for Accord said new interest-only borrowers would need to have an acceptable repayment strategy in place at the end of the mortgage term, which could include existing endowments or savings and investments.
The lender will allow the sale of the mortgaged property at the term end to be used as a repayment strategy, on condition that the amount borrowed against this strategy does not exceed 50 per cent loan-to-value and there is a minimum of £200,000 equity within the property.
A spokesperson for Coventry Building Society – the UK’s second-biggest mutual in 2016, according to industry data – also confirmed it had no plans to offer new interest-only products.
Several lenders have continued to offer the deals, despite a contraction in the market following the FCA’s clampdown – but they often come with strict affordability criteria.
Virgin Money requires a combined minimum gross income of £50,000, a maximum income multiple of 3.5 and evidence of a suitable repayment strategy.
NatWest, which offers the loans through its premier banking service, requires a minimum income of £75,000 a year, before discretionary bonuses, and a repayment plan approved by the lender.
The Nottingham also offers interest-only products, requiring a description of a repayment vehicle that is on the lender’s approved list and has been in place for six months before the mortgage application is submitted.
David Hollingworth, associate director for communications at London & Country, said while interest-only would not become a mass market, options for borrowers were increasing.
He said: "The vast majority of first-time buyers will be struggling to meet the requirements of the interest-only market.
"Nationwide are the big first-time buyer lender and may think that approach has benefited them in terms of simplicity.
"But the more lenders who are coming in helps to give more options to people who want to consider interest-only.
"You will have a good number of borrowers who have always used interest-only and had loans from before the credit crisis. They may be feeling the number of options open to them is quite limited but has improved, therefore they have more ability to shop around.
"There will be some good-quality interest-only borrowers out there, and some lenders may think they went too far initially in shutting the door on those borrowers."
simon.allin@ft.com
