Following on from the decision by Northern Rock to implement stricter affordability criteria in April 2009, the Royal Bank of Scotland has now followed suit by limiting the loan facilities offered on their flexible mortgages.

Although new homeowners can no longer access this mortgage deal, flexible mortgages have proved to be a real life saver for existing customers who are short on cash.

Through this deal homeowners are able to use their mortgage to take advantage of a loan facility that enables them to borrow cash – at will – which they then pay interest on using their mortgage rate.

And considering that even today, many mortgage rates are still cheaper than other forms of borrowing; this bonus has helped many property investors to make overpayments on their mortgage safe in the knowledge that they have got access to this money whenever they needed it.

However this has now all changed…

Dubbed ‘Foundations’, the RBS have now sent letters to many of their existing clients telling them that their credit limit has been cut – for many quite dramatically.

Assessing them on their usage of this facility over the last 12 months, those who have barely used this loan scheme have been chosen to have their credit reduced (based on an individual assessment of their credit history).

And this has spelt bad news for many homeowners who were heavily relying on this loan facility to help them get through financial rough patches. Limited on how much they can borrow, over 0.3% of their customers are expected to be affected.

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