Natwest - No IO

DGJsaver

Now that Natwest has made the decision to not grant residential mortages on an interest only basis , does this mean that they are looking to open up the lending gates a little and are adjusting their exposure , or is it just another example of a bank closing in on itself ?

Jimbo1976

I think it is more indicative of a lack of ability (or desire) to assess what is a credible repayment plan/vehicle. NatWest has never really had a huge appetite for mortgages (compared with its current account market share)

kingstreet

They've decided, along with many others, that IO lending is too risky and they don't make enough out of it to make the systems they'd need to continue to operate it, cost-effective.

It makes no difference to their general lending policy.

As one of the lenders which has taken a tranche of money under FLS (Funding For Lending) it will have to increase its net lending this year or face penalties if it fails to do so. This may result in lower rates, as lenders will all be obtaining funding at the same very low rate, creating a more level playing-field, or perhaps a greater appetite for higher loan to value business, or perhaps a slight relaxation of criteria in some areas.

DGJsaver

Thanks Guys , i didnt know that Natwest in particular has never been big on mortgages , going by their claims of best Bank for FTB , i thought otherwise...

I suppose IO is the riskiest way to lend large sums of money , maybe it went on for too long......?

Jimbo1976

IO is a great product for a niche group of borrowers, provided it is advised and underwritten sensibly. I hope lenders will see sense once then dust settles however the idea of having to do a mid term check on the repayment vehicle fills them with dread.

IO should never have been sold to those who have no real way of paying it off

kingstreet

Clydesdale has just launched an interest-only product only available via brokers;-

http://www.clydesdalebankintermediaries.co.uk/news/articles/clydesdale-bank-changes-interest-only-lending

Peter999_2

I don't blame them to be honest.

Lets face it, if they continued selling IO then in a few years when this site launches a mis-selling IO mortgage campaign it will cost them a fortune.

Brock_and_Roll

Funding more Lending Scheme - please dont let anyone think that most of this extra money borrowed is going to go to small business or homebuyers.

The rules of the scheme are so loose that [the British "state controlled"] banks are simply using the scheme to get a discount on their funding costs to allow them to lend cheaper and/or make a higher margin on the very top corporate credits where there is little or no risk.

The whole thing is pure politics and as a banker myself makes be even more disillusioned than I was before!