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Industry worries as Natwest bans interest-only for first-time buyers

Industry experts have expressed concern over NatWest Intermediary Solutions’ decision to stop offering interest-only to first-time buyers.

The bank says the move is about being a responsible lender and ensuring first-time buyers can afford their homes.

But Melanie Bien, director at Private Finance, says: “First-time buyers are all different and to tar them with the same brush is unfair.

“We have had a barrister client on £100,000 a year looking for his first mortgage so to say he can’t afford an interest-only deal seems wrong.”

London & Country says that a borrower with a £200,000 mortgage at 75% LTV on a 3.59% rate would pay £598.33 a month on an interest-only deal.

But on a 25-year repayment basis this shoots up to £1010.93.

David Hollingworth, head of communications at London & Country, says: “NatWest is shying away from first-time buyers using interest-only as a cheap mortgage. But it will also stop first-timers using it as a flexible option in the early years.”

Aaron Strutt, communications manager at Trinity Financial Group, says: “I can’t see the logic in singling out first-time buyers. From an affordability point of view it would make more sense for them to have half the loan on a capital re-payment basis.”

A spokesman for NatWest says: “Repaying capital from the outset will help protect first-time buyers from the possible threat of negative equity in the future.

“This will make it easier for them to move up the property ladder as they will have a better chance of building up equity in their property to provide them with the deposit needed for their next house move.”

The decision follows similar ones by Coventry Building Society to ban interest-only for first-time buyers, Northern Rock to restrict it to 75% LTV and Lloyds Banking Group to ban it for mortgages over £500,000.



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Infographic — health cash plans 2014

Health Shield has strengthened its position in the cash plan market, according to the latest Laing & Buisson report, increasing its market share by income from £27m in 2012 to £29m in 2013. The Health Cover UK Market Report 2014 revealed that the non-profit-making Friendly Society was the only provider in the top four to have increased its market share by income over the past year. Health Shield was also the only cash plan provider in the top four to have increased its market share by income every year for the previous five years. This infographic presents the figures.


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  • Lorraine loudon 1st February 2012 at 11:37 pm

    I called natwest ban for a loan mark sellick adv me to put 140pounds into a wot he said was managers acc then her release loan didnt happen I then spk to general manager mark Chapman who told me id get my loan but first go to a paypoint and pay 110pounds for a ukash voucher and he took the ref sayin that was the last step and guaranteed my money would b in my acc this didnt happen so I lost 250pounds can anythin b done to this company

  • lorraine loudon 1st February 2012 at 12:16 pm

    I was lookin for loan nat west ban promised a loan mark sellick adv me to put 140 pounds into managers acc at lloyds tsb which I did no money went in acc then spk to mark chapman general manager he told me if I get ukash vou of 110pounds and money would go in it didnt they wanted another 250 b4 money went into acc I didnt pay it so they have scammed me 250 as I suffer depression not good he was also readin my emails wot can I do my bruvs a procurator fiscal