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If you thought that cheap London mortgages came wrapped up in an interest-only package, then think again. As of today, borrowers who would prefer to pay off capital with an expected windfall or annual bonuses will have to provide their mortgage lender with proof that adequate savings are being built up. Interest-only mortgages have always been popular with City workers in London. Where penthouse pads come at a high price but big bonuses are being paid, an interest-only option equals a cheap mortgage.

Lloyds, Halifax, and Cheltenham & Gloucester will be the first lenders to restrict the number of interest-only mortgages available to borrowers in a bid to reduce the financial risks associated with speculative investment. Financial professionals are worried however that creditworthy investors will be prevented from accessing a cheap mortgage that they could easily afford to pay off. The change will affect anyone who wants to borrow in excess of £500,000 through Lloyds as they will be expected to make capital repayments.

Halifax and Cheltenham & Gloucester customers who want to take out a large interest-only mortgage to purchase a London property will have to pay a levy of 0.2% and provide a watertight capital repayment plan. This means that expected bonuses, investment or inheritance windfalls, and asset sales will no longer be taken into account. Instead, City workers who want to secure an interest-only deal will have to provide evidence of annual savings.

It is thought that today’s announcement will spark other banks to follow suit quickly, bringing an end to this type of loan. Borrowers need not fear though as cheap London mortgages are still available thanks to a drop in interest rates by the Bank of England. The average charge on a two year loan fixed rate loan has been calculated at 3.83%, the lowest figure in 15 years.

If you are wondering whether or not it is possible to secure cheap London mortgages without a sizeable deposit, do not fear. The days of 100% loans to buy a home may be gone, and lenders may seem less reluctant to take a risk, but there are plenty of ways for Londoners to secure an affordable mortgage.

It comes as no surprise that properties in the capital are generally more expensive than elsewhere in the UK, but for Londoners, home is where the heart is, and a city based residence is worth much more than bricks and mortar. One of the ways of buying a home if you are on a low income and you are a first time buyer is to apply for a Government loan scheme called HomeBuy Direct.

HomeBuy Direct is an equity loan scheme that is funded by both the Government and by housing developers to enable low income individuals to purchase part of a new build property. Essentially it means that if a buyer earns less than £60,000 they are eligible to borrow up to 30% of the deposit needed to secure a mortgage from a mainstream lender of up to 70% LTV. The loan is only available to those who want o purchase a minimum of 25% of a property, although it is possible to use it to purchase an entire residence, but you must be a first time buyer.

It is a way for low income first time buyers to get a foot on the property ladder, but it may not end up being the cheap mortgage deal that Londoners are after. Because the HomeBuy Direct scheme is an equity loan, it essential  means that the Government and the housing developer will own as much as 30% of your property, and if you have not had the funds to pay this back whilst repaying a 70% mortgage, you could face paying out big time to buy back that portion of your home.

This is because the equity loan is tied in to the market rate, so what you will owe will be proportional to the increase in your house value. Never-the-less, it is a good idea for many Londoners, and is certainly a way to secure a place to call home, something that is impossible to do with a rented property.

Choosing cheap London mortgages couldn’t be easier. There are so many great deals at the moment to suit all budgets and financial circumstances; whether you are looking for a cheap mortgage because you are a first time buyer, you want to purchase a property for investment through a buy to let scheme, or just want to find a better rate, there is something available for you. Lifetime trackers of just 2.99% are available with deposits of just 20% and there are even deals to obtain cheap London mortgages if you have a substantial deposit to put towards a property purchase which could reduce your rate to just 1.99%.

London is culturally diverse and has tourist attractions that bring people to the capital from all around the world. As such, the economy is booming, making it a popular place to purchase a property. Whether you want to relax in the suburbs, or live it up in the city, there are plenty of deals available to help you buy the right home to meet both your needs, your budget and get a rate that suits your personal financial circumstances, including cheap London mortgages designed specifically for you.

There are so many options for cheap mortgages that you can find something flexible enough to meet your needs whether it is a standard fixed rate mortgage over 2, 3 or 5 years, or a tracker mortgage which lasts for the duration of your repayments. Use a free mortgage calculator to find out which deal is best for you now and in the years to come.