Return of the interest-only mortgage The Financial Conduct Authority last year warned that 1.3 million people may be forced to sell their home, having taken mortgages which they now have little or no hope of repaying at the end of the term. This controversy, the high risks involved for lenders and the Britain's property market slump had prompted most banks to restrict or end interest-only deals since 2008. Among the exits have been Nationwide Building Society, Royal Bank of Scotland and Coventry Building Society. Most others have demanded that borrowers have at least 50pc equity in the property. However, this has only exacerbated the problem. Many interest-only borrowers have found they are unable to refinance at the end of their terms, with lenders also tightening affordability criteria. The new deal offered by Clydesdale and Yorkshire banks could represent a lifeline to some. It effectively cuts bills in half compared with an ordinary repayment mortgage, according to broker London & Country. The rate is 2.69pc on a loan to value of up to 80pc. The monthly repayments for someone borrowing £300,000 would be £673 compared with £1,375 on a monthly basis. However, if after three years the customer moved to a repayment basis on the standard variable rate offered by Clydesdale and Yorkshire banks, the cost would rise to £1,867 a month. So in effect, the mortgage could be stoking up even bigger problems down the line - at which point interest rates are expected to have risen. David Hollingworth, director of London & Country, said: "This is not a return to the days where interest-only mortgages were available to everyone. But it does give some flexibility to those who would otherwise struggle. Interest-only mortgage availability has been squeezed dry over the last couple of years, with lenders exiting the market. Confidence has returned to the housing market over the past year. Prices are up 4pc on average, according to lenders. The amount of money advanced to borrowers was £17bn in July. The number of mortgage deals available increased to its highest level since September 2008, according to the Mortgage Advice Bureau, which recorded 10,262 in July. This represented a 198pc increase in consumers' choice since the bottom of the housing slump in July 2009, it said. For the latest on mortgages: sign up to our weekly email