Newcastle BS exits interest-only mortgage market

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Newcastle Building Society has become the latest lender to exit the interest-only mortgage market.

While it has pulled its interest-only mortgages with immediate effect (14 December), existing customers will be able to continue with their mortgages as normal. However, any further borrowing by will only be available on a capital and interest basis.

A spokesperson for the building society said: "There has been a general downward movement in the market place in the level of interest-only borrowing allowed by lenders, with many already having withdrawn from the market. Our move is a reflection of this to ensure we are not out of line with the rest of the sector."

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Mixed reaction

Dale Jannels, managing director of mortgage broker All Types of Mortgages, says: "It's disappointing to see another lender withdraw from interest-only as there is still a good demand and a rightful need for such a product.

"We need consumer choice and this is quickly disappearing with regards to mortgage repayment options. My concern is that lenders are being too quick to jump on this band wagon to the detriment of suitable applicants."

Nationwide, NatWest, Royal Bank of Scotland and Coventry Building Society have also withdrawn their interest-only products. But the market has recently attracted Hinckley & Rugby as a new entrant and Abbey has relaxed its interest-only lending criteria within the last few weeks. It is now accepting loan applications from new borrowers for up to 75% LTV, with up to 50% of the loan available on an interest-only basis.

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