Clydesdale offers new interest-only deal One bank is bucking the recent trend of lenders pulling out of the interest-only mortgage market by launching a new three-year product. Clydesdale Bank will on Monday launch a new deal, dubbed "low start mortgage," which offers borrowers the option to fix their mortgage for three years on an interest-only basis. After this period, borrowers will be automatically moved to the bank's standard variable rate, currently at 4.95 per cent, on a capital and interest basis. The move by Clydesdale comes as a growing number of banks and building societies have stopped offering interest-only loans - products that do not require borrowers to pay off the capital each month. In December, Newcastle Building Society became the latest lender to pull out of the market for new borrowers, following similar moves by Coventry Building Society, Royal Bank of Scotland, Nationwide Building Society and Co-operative Bank. It follows years of lenders tightening their criteria after the Financial Services Authority warned over irresponsible lending practices. In October, the regulator announced strict rules on interest-only products, stating that lenders will have to assess affordability on a capital and interest basis, unless the borrower can prove that they have a credible way to repay the capital at the end of the loan, such as a savings or investment vehicle. Borrowers applying for Clydesdale's new product must be able to afford the loan on a capital and interest repayment basis. The deal will be available to borrowers with deposits - or equity - of 20 per cent or more. Rates start from 3.09 per cent for those with deposits of 40 per cent or more, rising to 4.49 per cent for those with a 20 per cent deposit, with a £999 fee. Brokers said the new product was innovative but sensible. It is likely to appeal to those homeowners who want to minimise their repayments in the first three years of their mortgage term. "It helps borrowers at the time they need it most but also provides the assurance that the loan will be paid off at the end of the term as long as payments are kept up to date," said Andrew Montlake of mortgage broker Coreco. The product will only be available through mortgage brokers and Clydesdale's private banking arm.