The end is nigh for interest only mortgages says London Mortgage Broker, London Mortgage Advice Thursday, 3rd June 2010

The latest lender to announce restrictions on interest only mortgages is Northern Rock.

Relying on inheritance, dividends or bonuses will not suffice,borrowers must own at least 25% of the value of their property and they must give concrete evidence as to how they intend to repay the capital.

Northern Rock will demand that you have a minimum of £150,000 equity in your home which must be 40% of its value – so the property must be worth at least £375,000.

Those included who have stopped offering interest-only are Yorkshire Bank and Scottish Widows Bank. Others charge extra: Lloyds, which also sells mortgages through Halifax and Cheltenham & Gloucester, charges 0.2% above its standard rates.

Is this the end of intetrest only mortgages, we ask

Maybe we will see lenders offering short-term interest-only mortgages which will convert to a repayment loan after a set time.

If you have an interest-only deal this can reduce monthly repayments by about a third compared with a repayment mortgage. For example, a repayment mortgage for £150,000 over 25 years at 4.5% would cost £833 a month, while an interest-only loan would be £562.