Mortgage experts say lenders are unlikely to follow the Royal Bank of Scotland’s lead and withdraw non-advised interest-only mortgages ahead of the mortgage market review.
This week, Money Marketing revealed RBS has changed its interest-only lending criteria. A spokeswoman says the move will ensure clients get the right product and provide evidence that they will be able to repay the mortgage.
The FSA’s final MMR consultation paper, published in December, proposed rules restricting the sale of interest-only mortgages to borrowers with a repayment vehicle in place. It also proposed a ban on non-advised mortgages.
Intermediary Mortgage Lenders Association executive director Peter Williams says the FSA is concerned about the sales processes around interest-only mortgages rather than the products themselves.
He says: “Most lenders will wait to see the FSA’s final rules before restricting their interest-only criteria.”
Association of Mortgage Intermediaries director Robert Sinclair agrees there is little evidence to suggest more lenders will alter their criteria ahead ofthe MMR.
However yesterday, Nationwide Building Society confirmed it has decided to scrap interest-only mortgages for new borrowers. The change will take effect on 11 October.
The decision does not affect existing borrowers, who are free to port their interest-only mortgage if they move home. However, existing borrowers will not be allowed to increase their borrowing on an interest-only basis.
The FSA’s final MMR rules are expected in the autumn.