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Interest only mortgage abolished by two leading banks
Interest only mortgage abolished by two leading banks
RBS and NatWest have abolished their interest only mortgage deals to push applicants onto repayment deals.
Wilmslow,
Cheshire,
United Kingdom
(sardnews.org)
07/12/2012
RBS and NatWest have abolished their interest only mortgage deals to push applicants onto repayment deals.
The FSA has warned that there has been major difficulties that borrowers have faced when their mortgage deal is up and they have had to pay off the shortfall. Many of these people were relying on endowments or pension funds which have underperformed, leaving borrowers unable to either remortgage or pay off the outstanding balance.
The Royal Bank of Scotland has followed in the footsteps of Nationwide Co-Operative Bank who abolished their interest only mortgage deals earlier this year.
Many lenders have followed suit and stopped offering interest only deals, or made it much harder to obtain an interest only deal by putting in place measures to ensure that borrowers will have the funds at the end of the mortgage term to pay off their outstanding mortgage.
The FSA Mortgage Market Review has reported that there is still a place for interest only mortgage deals, as long as the correct assessments were in place and that lenders were aware that there were provisions in place to meet the repayments at the end of the term.
Due to the widespread selling of interest only mortgages back in the early 2000s during the lending boom, many people were issued an interest only mortgage, with no checks in place to ensure that they could repay the sum required at the end of the mortgage. Most of these borrowers failed to do this, leaving them with loans that they could not afford. It's estimated that over the next 10 years there are over 1.4million interest only loans that are due to be repaid, with a value of around £115billion. This has led to crack down in recent years.
Richard Ignatowicz is a whole of market broker at Mortgage Savers. He specializes in buy to let mortgages and remortgage advice to investors and homeowners. He says:
"This news is not surprising given the way the mortgage industry is going. The problem is that existing borrowers who have interest-only loans will be unable to remortgage or move home without going on to a repayment deal, which will drastically increase their monthly mortgage payment. With other costs accelerating over the last year, not many families will be able to afford this. However, buy-to-let mortgages for landlords will still be available on interest-only deals so they will be unaffected, and existing customers who have secured an interest only deal will not be affected by this news. It's imperative that you seek sound financial advice from an independent mortgage broker before embarking on any deal as it's important to find the right deal for your circumstances."
Notes to Editors
Mortgage Savers is a "whole of market" mortgage brokerage. We are fully qualified consultants, not sales reps; offering totally impartial help and guidance. We help people find the best residential, commercial or buy-to-let mortgage product available from over 200 lenders offering in excess of 10,000 mortgage products. To find out why you should use a broker who is also an investor click here. For more information on Mortgage Savers click here.
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RBS and NatWest have abolished their interest only mortgage deals to push applicants onto repayment deals.
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