Customers with existing residential interest-only mortgages are not affected by the change.
RBS and NatWest will also continue to offer buy-to-let mortgages on an interest-only basis.
Moray McDonald, head of home lending at RBS and NatWest, said: “Residential interest only mortgages have been a declining part of our mortgage lending with only 4% of customers now applying on that basis. As a fast growing UK mortgage lender we want to focus on the products most of our customers are asking for. We don't rule out offering residential interest only mortgages to niche customer groups in the future but we would do that using specialist advisers rather than our broad base of branch and telephony advisers.”