Homeowners can turn their property into a cash machine with new flexible mortgage

NatWest has become the first high street bank to launch a flexible mortgage since the financial crisis as lenders look for new ways to attract borrowers.

The “HomeFlex” mortgage offers customers a flexible pot of cash that can be used at any time. 

Homeowners can withdraw money to pay for property refurbishment or a holiday, or to give a housing deposit to a child. Alternatively, borrowers can make unlimited overpayments without fees, reducing the interest they pay each month.

Any borrowing from the flexible pot will see payments rise.  The mortgage will initially be offered only to NatWest’s Premier customers before being made available more widely in the autumn.

Rates for the interest-only mortgage start at 1.73pc for a two-year fixed-rate deal. Flexible mortgages were popular before the financial crisis, but have largely disappeared from the market since.

This launch is the latest attempt by high street banks to gain customers in a stagnant housing market. Aaron Strutt of Trinity Financial, a mortgage broker, said Coventry Building Society was the biggest provider of flexible mortgages at present.

However, while borrowers with the Coventry loan can make unlimited overpayments, they are not able to take money from their home without reapplying, he warned.

Mr Strutt said most lenders had replaced flexible mortgages with offset loans, which allow customers to use a linked savings account to reduce the effective amount they are borrowing, lowering their interest bills.

Offset mortgages are primarily offered by local building societies, but larger providers such as Barclays, First Direct and Scottish Widows are also active in this market. 

“Borrowers with savings are missing out by not taking the most suitable mortgages for them. Offset mortgages can help fill the void left by low savings rates,” Mr Strutt said.

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adam.williams@Finance.co.uk