Mortgages 

Newcastle expands interest-only offer

Newcastle expands interest-only offer

Newcastle Intermediaries has extended its interest-only offer to its residential range including options for self-employed borrowers.

The lender currently offers interest-only loans on its buy-to-let, self-build and large loan mortgages but will now make these products available to residential home buyers.

Interest-only mortgages are home loans on which borrowers pay only the interest due on their debt, rather than paying down the capital at the same time.

Newcastle's residential interest-only mortgages are available up to a maximum 75 per cent loan-to-value, but an additional 5 per cent LTV can be secured if part of the loan is arranged on a repayment basis.

A two-year fix at 2.29 per cent is available for up to 60 per cent LTV and a five-year fix at 2.81 per cent for up to 75 per cent LTV, both with no fees, free valuation and £500 cashback.

Newcastle also offers an 80 per cent LTV product on a three-year fixed rate of 2.12 per cent and with a £498 product fee.

Steve Carruthers, head of mortgage distribution at Newcastle Intermediaries, said the lender wanted to introduce the interest-only option to its standard residential mortgage range to give borrowers more flexibility.

He said: "Whilst the interest-only market is limited in size, as a customer focused lender we believe we should provide this as an option for borrowers who have a clear need for interest-only and have a sensible and credible repayment strategy in place."

Kevin Dunn, senior partner at Furnley House, said interest-only could be a good option for many types of borrowers such as self-employed workers and anyone who might receive irregular bonuses, while also working well in conjunction with flexible mortgage products.

He said: "Historically interest-only mortgages were abused by advisers, so as an adviser you have to ensure it is going to be suitable for the client, as there has to be a level of discipline with the client to ensure their mortgage is repaid by the end of the term.  

"As more lenders re-enter this space it can only be a good thing for advisers and clients."

The Mortgage Market Review in 2014 imposed tighter restrictions on interest-only lending, requiring lenders to only provide new interest-only mortgages to borrowers who could prove a repayment plan

rachel.addison@ft.com