Natwest has declared it will ban interest-only 1st time buyer mortgages. The state owned bank has further hindered a revival to the housing market. Natest state that 'as a responsible lender, it is prudent for first time buyers to build up equity in their property by reducing their capital from day one, particularly in times of economic uncertainty. Repaying capital from the outset will help to protect first time buyers from the possible threat of negative equity in the future.
This move from RBS group shows they have little faith in house prices increasing in the near future, since there would not be any threat to negative equity in this instance. It further backs up noise of a possible double dip recession, loss of public sector jobs and a rise in repossessions will at best halt the house prices or worse show further declines in house value.
This move by RBS group follows identical moves from Coventry Buildings Society, and similar moves from Northern Rock banning interest-only on mortgages over 75% loan to value, and Lloyds banking group banning interest-only on large loans.
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