by Mark Johnston
Natwest have decided to pull their interest only mortgages offered by their intermediary arm. The bank recently made the decision to stop offering interest only mortgages to first time buyers following a review.
The decision was probably brought about by the financial services authority’s mortgage market review which may force lenders to stop offering interest only mortgages altogether. The draft regulations by the FSA look like they will require lenders to make sure that borrowers have a realistic and sustainable plan in place to pay off capital on interest only mortgages. Many believe that this not a viable option to either evidence or administrate and think that it is the FSA’s way of outlawing these types of mortgages as they will become too difficult to manage once the regulations come into effect.
This change will take immediate effect so any first time buyers applying for a mortgage from either NatWest Intermediary Solutions or the wider RBS group will only be able to choose a capital repayment option. That said, this looks only to be the end of first time buyer loans as other types of customers can still get interest only mortgages so long as they have at least a 25% mortgage as all other existing mortgages have a loan to value of 75%.
Natwest aren’t the only ones who are looking to drop some of their more riskier products. The state owned Northern Rock, Lloyds Bank and even Coventry Building Society.
A spokesperson for Natwest said: “As a responsible lender, it is prudent for first-time buyers to build up equity in their property by reducing their capital from day one, particularly in times of economic uncertainty.
“Repaying capital from the outset will help to protect first-time buyers from the possible threat of negative equity in the future. In turn, this will make it easier for first-time buyers to eventually move up the property ladder, as they will have a better chance of building up sufficient equity in their property to provide them with the level of deposit needed for their next house move.”
At the same time as they stopped offering first time buyers interest only mortgages they also announced some changes to their main mortgage range. Like many high street lenders, Natwest reduced some of their rates by up to 0.5%which included their 70 and 80 percent loan to value (LTV) options.
Natwest’s 70 percent loan to value mortgage was reduced by 0.1% to 3.50% together with their 80 percent loan to value mortgage which was reduced 0.5% to 5.29%.
The 70% LTV remortgage has been reduced by 0.10% to 3.50% and the 80% LTV remortgage has been reduced by 0.50% to 5.29%. Its two- year fixed rate 80% LTV purchase product has increased by 0.10% to 5.29% with the two-year tracker and five year fixed rate 60% LTV mortgages increasing by 0.20%.
Their best offer at the moment is a 2 year fixed rate mortgage with cash back, it has an excellent rate of 2.75%, £250 cash back and no product fee but sadly is only available to those with a heart stopping 50% deposit.
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