Nationwide IO mortgage / saving & investment plan

lowis

Just been to see the Natiownide for a mortgage and they have agreed to lend to me on the condition that I have an investment/saving plan in place by the time the mortgage is approved. Is this standard practice or only particular to certain lenders? Other lenders I have approached have barely mentioned it and have never said it is a requirement. The Natiownwide said they only do 'responsible lending'. It's not a case of selling me their own product either as the plan can be form anywhere.

Any advice?

Joe_Bloggs

You will have to pay the capital upon which interest is paid at some time. Why put your trust in some speculative returns on investments, to pay off your capital when money in the hand does just the same.
J_B.

sparkle84

How would you pay by the capital if you don't have a savings/investment plan in place - why are you going for an IO mortgage anyway is this the way things are going these days people taking out IO mortgages and then being surprised when asked by banks how they are going to pay it back - No offence OP I am not having a go at you but I find your question amazing

lowis

poit taken sparkle - however in the short term, i can't afford to pay anything signifcant into an ISA - if i could I wouldn't bother with an IO mortgage and go straight for repayment. i do have a long term plan though and this involves moving on to a repayment mortgage in 3 years time - maybe less.

payless

Regulators have taken a big interest in firms transacting "pure interest only "
mortgages ...

dunstonh

Yes, there certainly does seem to be a bit of focus on it from the regulator. My network issued revised proceedures for IO mortgages in the last 2 weeks.

It seems to have become a high risk issue. Probably an attempt to stop us mirroring the US where most mortgages are IO and property prices are sky high and ripe for a drop and with increasing inflation leading to increasing interest rates, that drop looks increasingly likely.

Nationwide are probably looking at this from a risk and compliance side. Whilst it may cost them a little business now, when the s*** hits the fan in the coming years, they would be in a much more comfortable position.

lowis

well that's fair enough - i think i would rather get involved with a company that adheres to responsible lending at fair rates. at least they aren't insisting i buy their investment products.

i guess for now i will just open up a 'token' ISA just to get the plan number and pay the minimum i can get away with and then plan to increase in the future. mind you, i guess if the ISA/plan is with someone else then Nationwide would have ni idea if i closed it after a couple of months...

dunstonh

If its just something they have said that they want, then you would get away with that. If they want to see details of it and make sure the payment is suitable to achieve the goals, then a token ISA on minimum amount wont suffice.

Joe_Bloggs

@Iowis
You can pay cash into an IO mortgage, when you have it. You don't have to speculate with it first. If you don't have the cash then you probably could not afford to speculate in the first place.
J_B.

lowis

hi joe, yes i have the option to pay £500 a month extra to reduce the capital on the IO mortgage...i'd rather pay any spare cash i have off the capital than into an investment plan TBH. but hey-ho....

Joe_Bloggs

@Iowis
Have you had much success in the past with your investment plans ?
J_B.