Nationwide, the UK’s largest building society, will soon re-enter the interest-only mortgage market - but only high earners will be eligible.
It’s been eight years since Nationwide last offered interest-only mortgages, but the building society has confirmed that it plans to launch them again over the coming weeks.
Interest-only mortgages, as the name suggests, allow homeowners to repay just the interest they owe each month, and not the capital they’ve borrowed. This must be repaid at the end of the mortgage term, using a repayment vehicle that can include savings, investments or the sale of the property.
Available through brokers
Once re-introduced, Nationwide’s interest-only deals will be available through 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.
Henry Jordan, Nationwide’s director of mortgages, 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 taking out an interest-only mortgage with Nationwide must be looking to borrow no more than 60% of the property value. Customers must repay their mortgages through the sale of their main residence to ensure there is a “realistic exit strategy” at the end of the mortgage term.
They will need to have minimum equity of £300,000 in London, £250,000 in the south-east and £200,000 across the rest of the UK. Nationwide has set these criteria to mitigate the risk of future negative equity, which occurs when mortgage customers end up owing more than their property is worth.
Nationwide to offer interest-only mortgages