MSE News: RBS and Natwest demand £50k salary for interest-only mortgages 28 March 2012 at 10:45AM edited 30 November -1 at 1:00AM in Mortgages & Endowments 36 replies 4.3K views

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"The pair are the latest in a long line of providers restricting access to interest-only mortgages..."

Read the full story:
RBS and Natwest demand £50k salary for interest-only mortgages

alinwales

surely it doesn't matter how much someone earns, if they don't have a repayment vehicle then they are still a bit on the irresponsible side. Someone earning 50K can still overstretch themselves, and the consequences probably worse if they lost their job.

The_J

Interest only lending is finished. 12 months tops.

tifo

so they want to give interest only mortgages to their bonus earning staff only, and that's by using taxpayer money in the first place ??

these days, what first time (youngish) buyer is earning £50k or more?

The_J

Well for one, FTBs cannot get interest only with them regardless of income.

Bonuses are also not factored into the 50k. It needs to be 50k basic. I would guess that >95% of RBS employees earn less than 50k basic a year.

FatherAbraham

The trouble with this article http://www.moneysavingexpert.com/news/mortgages/2012/03/rbs-restricts-access-on-interest-only-mortgages is that it says:

Some consumers, especially first-time buyers, prefer interest-only loans as the repayments are much lower than for a standard repayment mortgage.

The whole point is that there are no repayments on a IO-mortgage. There are just interest charges to meet, until the capital is due at term.

Misusing the word "repayment" in the way that the article does is just going to confuse readers.

Warmest regards,
FatherAbraham

jamesd

Seems daft to have a £50k minimum income when what matters is income compared to loan amount and having a repayment vehicle. No point at all in a £50k income minimum for say a 25 year £50k mortgage or one where the repayment vehicles are already enough to reduce the uncovered balance to £50k.

Better to pay attention to repayment vehicle, regular monitoring and affordability than use a fixed income minimum. The income threshold seems to be saying that those on less can't do prudent financial planning.

The_J

Well I can see the logic, a loaf of bread costs the same whether you are on 10k or 50k so someone who earns more has more disposable income to be taking a risk on complex investment products.

However, that would be to suggest that they are being prudent when in fact it's purely because they are being threatened by the FSA as being responsible for the interest only.

That in turn is ridiculous, people need to start taking personal responsibility for their decisions. That article does not help, no client of mine would EVER take an interest only mortgage because it is "cheaper" or a "way to get on the ladder", it's irresponsible to even suggest that.

regbrown

hmm. not so good. I know a few of us have interest only mortgages to give us some flexibility while having little kids.

We are FTB and had a 25% deposit and over pay the heck out of it when we can, only falling back to interest only when maternity pay kicks in etc

surely its the amount you borrow, not your wages. (and your ability to understand what you are taking out)

Thrugelmir

regbrown wrote: »

surely its the amount you borrow, not your wages. (and your ability to understand what you are taking out)

Even with the best intentions. Relying a policy of paying when you can. Is fraught with downside risks. Part of the reason we have the problem now.

Interest only does little more than push house prices higher in any event. So of benefit to all with a more conservative approach.

Thrugelmir

jamesd wrote: »

Better to pay attention to repayment vehicle, regular monitoring and affordability than use a fixed income minimum. The income threshold seems to be saying that those on less can't do prudent financial planning.

I've asked you many times but you've yet "to prove" your argument. What works for you (at the moment) , may not for many people.

Assets prices are only high due to QE (on a global scale). The prop will be removed at some point.