There is growing concern about the ability to repay interest only loans from the City regulator. Thousands of these types of loans were taken out during the good old days of the property boom. The economic downturn which is currently taking place is making it difficult for any homeowner to repay loans.

The Financial Services Authority made a suggestion this summer of making regular payments, so borrowers could let lenders see there was a process to pay method readily in place.

But, in a somewhat surprising move by the Council of Mortgage Lenders (CML); they have warned that if the FSA proposals are implemented, these types of loans will be a thing of the past.

Michael Coogan, director general at the CML, commented on the FSA proposals, saying: "We do not want to see measures that would effectively regulate them out of the market, and we believe it is possible to address the FSA’s concerns, without imposing costs and requirements on lenders and borrowers that are likely to prove to be unacceptable."

There is speculations that over 75% of all interest only mortgages have no specified repayment schedule, which concerns lenders.

There is approximately 470 billion pounds of interest only mortgages outstanding, according to the CML.

Melanie Bien, of mortgage brokers Private Finance, commented on the FSA proposals and the ability to get these types of loans, saying: "Since the FSA first voiced its concerns about interest-only, many lenders have restricted maximum loan-to-values, reduced acceptable investment vehicles for paying back the capital, and in some cases, banned first-time buyers from taking out such a deal. It is already much harder to get an interest-only loan. Yet for some borrowers, who have thought seriously about how they will repay the capital or landlords with buy-to-let mortgages, interest-only is the right option.

"When it comes to mortgage, one size most certainly does not fit all. Anything which reduces consumer choice and makes it even more difficult to get a mortgage, has to be a bad thing."