High-risk home loans, once dubbed ticking timebombs by the City watchdog, are back on sale - but this time with a safety net attached.
Clydesdale and Yorkshire banks have launched an interest-only mortgage with a twist: borrowers pay just interest for the first three years, then switch to a typical repayment loan for the remainder of the deal, the Daily Mail reports.
This means they will pay off the interest and the capital, and end up owning the property.
It is in stark contrast to the estimated 1.3 million borrowers who have taken out a traditional interest-only loan.
They have been paying only the interest without making provision to repay the capital - and are running the risk of ending up homeless.
In the case of the new type of home loan, the two banks - which are owned by National Australia Group - have rebranded it as a low-start mortgage, on offer in branches.
It allows borrowers to pay up to 50% less in monthly payments at the start of the loan.
This makes it more affordable for many who would otherwise struggle to get on the property ladder.
Designed for those anticipating a salary rise, such as trainee professionals, including teachers and solicitors, it will also appeal to those who want to spend money on other things, such as repairs or renovations, in the early years of home ownership.
Borrowers stuck on an existing interest-only deal elsewhere, and who have built up some equity in their home or a savings account, could also apply and use the innovative loan as a way to escape the interest-only trap.
Both banks say they will make checks to ensure borrowers can meet the jump in monthly payments after three years.
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