Royal Bank of Scotland said it will return to selling interest-only mortgages after scrapping the riskier loans in the wake of the financial crisis.
RBS will offer the loans to wealthier customers with strict lending criteria from Sept. 21, the Edinburgh-based company said in a statement on Thursday.
The bank, 73 percent owned by the government, was among major British lenders including Nationwide Building Society to stop selling interest-only mortgages in 2012 amid scrutiny from regulators, as some borrowers struggled to make repayments during the financial crisis. The loans can carry higher risk because they can leave homeowners facing a jump in their bills down the road.
"We are re-entering this market due to customer demand," Lloyd Cochrane, head of mortgages and protection for RBS and its NatWest consumer unit, said in the statement. "We will keep in touch with our customers to support them to stay on track with repaying their mortgage."
The bank will only offer the loans to customers who earn at least 100,000 pounds ($155,000) per year, excluding bonuses and with a maximum loan-to-value of 75 percent. The lender will also require an "acceptable repayment strategy" from borrowers, according to the statement.
About 1 million Britons could have their homes repossessed because they have no way of paying off their interest-only mortgages, the U.K.'s Citizens Advice Bureau said last week. The products have "forced many into a financial black hole," Chief Executive Officer Gillian Guy said.
Chief Executive Officer Ross McEwan is looking to expand in mortgages as part of his plan to focus on U.K. and Irish consumer and commercial lending while shedding operations overseas.
Mortgages are a "key area of growth for us," he said on a call with analysts at the bank's first-half results presentation in July. RBS has been growing in this market for years, though it's "still weak for the size of the bank we are and for the customer base we have," McEwan said. "We believe that, with the right capability and service delivery, we can grow this safely."
