Interest Only Mortgages In Doubt

Amongst the High Street Banks the future of interest only mortgages is in doubt. With the exception of Santander who are increasing their interest-only mortgage range, the majority of high street banks are withdrawing their range in this market, with Royal Bank Of Scotland, Natwest, Nationwide and Coventry amongst them. Coventry outlined a  lack of market demand as their primary reason for leaving the interest-only market, with them making up as little as 2 percent of all residential mortgage applications. This combined with the two major British high street names making their exit is being seen as a watershed moment for the product.

The move follows the lenders’ decision to clamp down on criteria attached to the deals last year. According to Moray McDonald, head of home lending at RBS/ NatWest, only 4% of customers apply for the deals. He said: “As a fast-growing UK mortgage lender we want to focus on the products most of our customers are asking for.”

The interest only mortgage has been under great scrutiny as there is some discrepancy over whether or not the majority of such mortgages taken out during the property boom may have been mis-sold and that the banking industry may suffer with compensation claims down the line.

Unfortunately too many people have used interest only in the past as a way of making sure they can actually afford the mortgage in the first place and deferred worrying about how they are going to pay it back. It was never really right that someone could borrow 90% LTV and say they will pay the loan back by selling a property that could depreciate in value in a few years time.

At Enness Private Clients we have relationships with over 45 private banks, the majority of which offer interest-only mortgages on assessment of the clients background. Good news for both employed high net worth individuals who receive large lump sum bonuses and likewise self-employed high net worths who take a large dividend each year. It would seem then that the interest-only mortgage has become more of a niche product that is only accessible to those with sizeable assets and income; a preserve of the wealthy through the private banks.

To discuss your mortgage requirement with us or for any queries about interest only mortgages please contact one of our expert brokers, who will be happy to chat through your options with you.

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