RBS cuts 'borrow back' option on flexible mortgages

Posted: 09 Dec 2009 11:34:01 GMT

The Royal Bank of Scotland (RBS) is to cut its borrowing facility that is currently offered to those with a flexible mortgage.

At present, flexible home loans give borrowers a loan facility that they can use when they choose and then pay back the interest at the mortgage rate.

This means that homeowners can overpay on their mortgage safe in the knowledge that they can access their cash if they need it, working slightly like an overdraft.

RBS has now slashed the amount that can be borrowed, which will affect approximately 0.3 per cent of their customers who signed up to a Foundations mortgage deal.

David Hollingworth from brokers London and County said: "This is terrible timing. These mortgages were sold as being flexible on the basis that home owners could dip in to them when they needed."

He went on to add that the bank has made this sudden change to suit itself.

Making overpayments on this type of mortgage could allow homeowners to pay off their loan early, as well as potentially saving thousands of pounds in interest payments.

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