Lloyds TSB, one of Britain’s biggest mortgage lenders, came under fire yesterday after it emerged that it was stopping borrowers switching from repayment mortgages to interest-only deals. The lower monthly repayments of interest-only mortgages are often a lifeline for hard-pressed borrowers.

The disclosure came as figures showed that repossessions surged by 71% over in the three months to June.

Switching from a repayment loan to an interest-only deal, which could save a borrower with a £150,000 loan more than £200 a month, is an option that lenders can offer borrowers who are struggling to meet repayments to try to keep them in their homes.

Financial Times