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October 5, 2012
Nationwide has announced it will stop offering interest-only mortgages from next week. A spokeswoman for the mortgage provider insisted the loans had become a “niche area”, accounting for only 3% of new mortgages. She added that on the firm’s back books interest-only loans made up 20% of total mortgages, about half of the industry average.
This decision has been on the horizon as Nationwide have increasingly tightened lending on interest-only mortgages, currently limiting them to just 50% of the property’s value. Moreover, the Financial Services Authority have recently warned that it wants lenders to only offer such mortgages when there is a credible chance of repayment, rather than just a reliance on rising house prices.
Clare Francis, mortgage expert at MoneySupermarket.com, said: “Nationwide’s decision could certainly sound the death knell for interest-only mortgages. 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.”
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