Royal Bank of Scotland has tightened its interest-only criteria and will now only offer this type of mortgage on an advised basis.
The changes to RBS policy were enforced yesterday but the bank says no proactive communication was made to clients or intermediaries about the changes. Only those authorised to give advice can now complete an application for an interest-only mortgage.
An RBS spokeswoman says: “We have implemented changes to make sure clients get exactly the right product for them an ensuring there is evidence in place at the beginning to be clear that they will be able to repay on a longer-term basis. We are informing customers as of yesterday of the changes.”
In its final mortgage market review consultation paper, which was published in December, the FSA proposed that lenders must assess affordability for interest-only loans on a capital repayment basis unless the borrower has a “clearly understood and believable” was to repay the mortgage. It also proposed that evidence of a repayment vehicle must be sourced at the application stage and lenders would be required to check on the repayment strategy at least once during the mortgage term.
In the same paper, the regulator proposed to ban non-advised mortgage sales where there is a “spoken or other interactive dialogue” between a customer or a firm. The proposed ban would not apply to high-net-worth borrowers or mortgage professionals and other borrowers can proceed on an execution-only basis if they reject the original advice.