The Low-Start tracker, currently 0.49%, is available for loans between £25,000 and £750,000 and at between 85% and 90% LTV.
But the tracking rate of 0.01% below base rate only lasts until December 31 2010, at which point the rate jumps to base rate plus 5.49% until July 31 2012.
Aaron Strutt, broker with Trinity Financial Group, says: “The rate is low now, but there is still quite a large chance that base rate might go up. Brokers just want some more normal rates, ideally for two-year fixes.”
The move follows the decision last week from Lloyds Banking Group, C&G’s parent company, to cap its interest-only mortgages at £500,000.
The lender has also changed its policy on what is considered an acceptable repayment vehicle for interest-only mortgages, with the sale of a house or business or an inheritance no longer permitted.