The FSA has stated that it does not intend to ban interest-only mortgages.

In its business plan for 2011/12, the regulator says it does not want a ‘only size fits all’ approach in the Mortgage Market Review (MMR). It claims it will continue to consult and analyse the impact of its proposals.

The FSA says it will publish an indicative cost benefit and impact analysis of a full package of proposed rules in the summer and follow this up with its final package of rule changes in early 2012.

It says it will seek the right balance between protection for consumers, sustainability of the market and consumer choice.

However, the FSA says it remains focused on ensuring that the new regime includes a robust assessment by the lender of the affordability of the loan for the individual, both for interest only and repayment loans.

Hector Sants, FSA chief executive, said: “The 2011/12 business year for the FSA will be a difficult one. We have to ensure that we are operating effectively as a supervisor as well as taking forward the key policy initiatives. The principal ones are progressing the domestic consumer protection strategy