ニュース
Nationwide sounds death knell for interest only mortgages
08-10-2012
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The Nationwide Building Society said that interest only mortgage lending has become a niche area and it will stop offering mortgages on this basis from next Thursday.
Customers who are currently on an interest only deal with Nationwide will be unaffected, a spokeswoman said.
Like many other lenders, the Nationwide had already limited its interest only lending to up to 50% of the property's value. Only 3% of its new mortgages are interest only and of existing back book mortgages around 20% are interest only.
The decision is likely to be the death knell for interest only mortgages, according to Clare Francis, mortgage expert at MoneySupermarket.
‘It's a big decision for one of the country's largest lenders to pull out altogether and, if others follow suit, the days of interest only mortgages may be numbered,’ she said.
‘The vast majority of people nowadays opt for repayment mortgages and interest only loans have become a niche product, particularly as eligibility has become tight. However, there is nothing wrong with an interest only mortgage, as long as the borrower knows how they will repay the capital once the mortgage term ends, and a payment plan is put in place,’ she explained.
‘That said, there are fears that some of those with interest only mortgages do not have an adequate repayment plan in place which could cause major problems when their mortgage term ends. Making this type of loan harder to come by helps reduce the risk of the so-called mortgage time bomb exploding,’ she added.
Indeed, the Financial Services Authority recently warned an estimated 1.5 million such loans worth around £120 billion are due for repayment in the next decade. It wants to see interest-only mortgages offered in future only where there is a credible plan to repay the capital, and borrowers cannot just rely on hopes that house prices will rise.
Francis said that it isn't likely to have a major impact on the housing market in the near term as the vast majority of people opt for repayment mortgages. A repayment mortgage gives a guarantee that your debt will be paid off by the end of the term, so it's the simplest and often most appropriate option.
‘Those most affected from the restriction in the availability of interest only loans will be borrowers who already have them. They may find they are unable to remortgage onto another interest only deal. As a result, they will either have to stick with their current mortgage or switch to a repayment loan which will mean an increase in their monthly mortgage payments. Anyone worried about this should speak to an independent mortgage broker for advice,’ she added.
