Nationwide is expanding interest-only mortgage lending by offering customers more choice and flexibility.
Interest-only mortgages are agreements where the borrower can only repay the interest, and not the loan itself.
These mortgages have become less common in recent years as a result of the financial crisis and most borrowers use repayment mortgages, where both the loan and interest are paid off gradually.
There is another option – called part and share – and that is a combination of repayment only and repayment.
Today, Nationwide revealed that it is expanding its range of interest-only mortgages by extending these mortgages to all buyer types up to 75% loan-to-value (LTV) or up to 85% LTV, if the application is part interest-only and part capital repayment.
One of the conditions for taking out an interest-only mortgage is that borrowers must have a plan to repay the capital.
With this in mind, Nationwide is also expanding the reimbursement options it accepts beyond existing primary residence sales. It now includes UK savings, investments, pension funds and other property.
Applicants need a minimum qualifying income of £75,000 for single applications and £100,000 for joint cases, unless one applicant earns at least £75,000.
Starters can benefit from interest-only
As part of the enhanced offering, Nationwide is also offering its Interest Only range to first-time buyers. Currently this is only possible through brokers, so potential borrowers will need to speak to an advisor or intermediary first.
Carlo Pileggi, Head of Mortgage Products at Nationwide, said: “We are pleased to be expanding and improving our Interest Only offering. Interest Only can be a great option for customers who have a suitable repayment tool in place and want the flexibility offered by lower monthly payments.
“These changes, together with robust criteria, ensure we can increase the support we can offer borrowers looking for more flexibility, while ensuring Nationwide continues to lend responsibly.
“As the nation’s second largest lender, it makes sense that we continue to look at the products we offer, including those we make available through brokers, to ensure we can help them meet as many of their customers’ needs as possible.”
Nationwide’s Interest Only changes come just a month after Gen H launched its partial mortgage for first-time buyers. The product was intended for people with a down payment of at least 5%.
Emma Jones, director of Runcorn-based Whenthebanksaysno.co.ukwho spoke to the Newspage Agency was impressed by the innovation.
She continued: “We are seeing a lot of forward thinking to open up the property market in new ways and the Nationwide Interest Only offering is the latest example of this.
“It is encouraging that it is only available on an advisory basis as these types of loans carry risks and borrowers need to fully understand what they are dealing with.”