The Co-operative Bank withdraws interest only mortgage range
From Tuesday 8th May 2012, new customers at The Co-operative Bank will be able to take out mortgages on a capital and repayment basis only.
This change will not affect existing interest only mortgage customers.
Interest only mortgages have proven popular over the years, however a combination of factors including falling house prices and uncertainty about the direction of interest rates have led to a rapid decline in demand for these loans. Currently less than 10% of new mortgage customers at The Co-operative Bank are taking out mortgages on an interest only basis; this figure has fallen rapidly over the last five years from almost 25% in 2007.
The Co-operative Bank fully supports the changes relating to interest only lending which are currently being proposed for 2013 under the FSA's Mortgage Market Review. We expect that these changes will see a move to all customers who apply for a mortgage being assessed on the basis that they can afford a capital and repayment loan. In line with these suggestions we are choosing to lend to new customers on a capital and repayment basis only moving forwards.
As a responsible lender, The Co-operative Bank remains committed to our existing interest only mortgage customers who will still be able to switch to any open product for the same amount of borrowing on an interest only basis when they come to the end of their deal. In addition they will also be able to take their interest only mortgage with them should they move home. As part of this commitment, the bank also launched a communication programme to all its interest only customers to make sure they are aware of all of the options that are open to them with regards to their mortgage.
James Hillon, Head of Mortgages at The Co-operative Bank said: "The mortgage market has changed greatly in the last four years and as a responsible lender we closely monitor these developments. With house prices continuing to stagnate, we're seeing that buyers are increasingly taking a long term view to home ownership rather than seeing it as a route to watch their money grow quickly as was the case for many in the property boom years from the late 1990s onwards.
"We understand that all our customers have individual requirements and as a responsible lender we remain committed to working with them to find an affordable solution to owning their own home. For example we know that many customers historically turned to interest only mortgages as a way of meeting monthly outgoings when on a variable monthly income. For these customers we continue to offer a range of mortgages which enable them to make overpayments as and when they can afford to, then use their overpayments fund to meet repayments in the months where they earn less."
The above changes will also apply for mortgages offered through Britannia and residential mortgages offered through Platform, the dedicated intermediary lender for The Co-operative Bank.
Further information about the mortgages available at The Co-operative Bank can be found online at: co-operativebank.co.uk/mortgages.