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Nationwide is the UK’s second largest building society, they will soon come back into the interest-only mortgage market – however only high earners will be eligible. It has been at least eight years since Nationwide offered interest-only mortgages, however, the building society has confirmed that it plans to relaunch them again. Interest-only mortgages, usually allow homeowners to repay just the interest owed each month, and not the capital which they borrowed.
This must be paid back at the end of the mortgage term, a repayment vehicle would be needed to run along side which could include savings, investments or the sale of the property. Available through brokers once it is re-introduced, Nationwide’s interest-only deals would be available through mortgage brokers to those who have a minimum income of £75,000 or £100,000 for joint income. The building society is hoping to target high earners who want to use an interest-only mortgage to provide them with greater flexibility and not because they need to make their mortgage more affordable.
Nationwide’s director of mortgages, Henry Jordan, said: “As the UK’s second largest lender, it is natural that we continue to look at ways we can support the mortgage market. At almost seven per cent, interest-only remains an important part of the market and one we are keen to support by providing access to our standard product range to applicants with good equity and a stable income profile.”
Borrowers who take out an interest-only mortgage with Nationwide should be looking to borrow no more than 60% of the property value. Customers have to repay their mortgages through the sale of their main residence to ensure there is a “realistic exit strategy” by the end of the mortgage term.
A minimum equity of £300,000 in London, £250,000 in the south-east and £200,000 across the rest of the UK is required. Nationwide has set these strict criteria to mitigate the risk of any future negative equity, which does occur when their mortgage customers owe more than what their property is worth.
Nationwide to offer interest-only mortgages