By Tony Booth

Struggling financial institutions have now turned their attention to the interest-only mortgage range of products -with the third largest UK lender, the Abbey, being the first to introduce tough new criteria ... and this is just the start of an expected assault on this slice of the investor market.

The Abbey startled investors last month by announcing it would, with immediate effect, be demanding a 50 per cent deposit from homeowners that were seeking an interest-only mortgage.

The lender's new rules affects all new borrowers without a proven repayment record. Borrowers with a proven and acceptable repayment record will face a minimum 25 per cent deposit.

Experts have suggested this is just the start of a determined onslaught on this slice of the market...and many other lenders are likely to follow with similar announcements in their pursuit of a lower risk strategy.