New figures show an increase in interest only mortgages and the cost of the average mortgage has risen again, despite further interest rate rises predicted.

A casual analysis of the mortgage market since 1996 shows that increasing numbers of consumers switched from endowment mortgages - as people lost confidence that their policy would generate sufficient funds to repay the original loan – and a growing number of home owners opting for repayment (capital and interest) mortgages, ensuring that debts were repaid by the agreed date.

However, more recently, repayment mortgages have appeared to decline in popularity. Their market share has fallen from over 70% in 2003, to 58% now. This is largely due to a rise in interest-only mortgages - the proportion of broker business made up by interest-only mortgages has risen from 11% to 26% over the last four years, according to the latest research by Paragon Mortgages. (Read more: A Time of Interest).

While interest only may be the only plausible option for many looking to step on to the property ladder, it’s worth remembering that the full loan will need to be paid back at some point and the switch from interest only mortgage repayments to capital repayments can be a difficult one. Financial advisers argue that it is important that consumers are fully aware of their situation, the consequences of just paying the interest and the true cost of fully paying off the mortgage.

But despite the increase in interest only mortgages, John Heron, managing director of Paragon Mortgages believes that repayment mortgages remain the mortgage of choice for owner occupiers.

“The interest-only sector has grown both with house prices and buy-to-let,” he says.

“Interest-only mortgages are ideal for buy-to-let investors who benefit by maintaining gearing and at the end of the term, have the choice to either re-finance or sell the investment property to pay back the loan.”

However, Heron stresses that home owners must be more vigilant when opting for an interest only mortgage. Without the flexibility of being able to sell the family home to repay the loan at the end of the term, it is vital they ensure there is a repayment vehicle in place.

The growth in interest only mortgages also means that more Britons are borrowing more, often remortgaging against the value of their homes. Despite four base rate rises since last August and the prospect of at least one more to come (Read more: Interest Rates Rise ‘Likely’) the average remortgage is now £122,5411, up 7.19% on levels from the same time last year.

The increase reflects past rises in house prices as people now look to re-fix after their initial introductory rate mortgage ends; but it is also a sign that many may be using equity in their house to deal with other debts.

“Recent reports from the retail sector, including disappointing sales growth figures from both Tesco and Sainsbury, would suggest that we’re not spending this money on goods and services but using it to reduce other debts,” said Robin Amlot, Senior Editor of Moneyextra.com, who commissioned the research.

“It seems many people are opting to switch expensive credit card debt and overdrafts into long term low interest rate mortgage debt. Of course, this does mean they could be paying far more interest in the long run but it is one way of reducing immediate monthly outgoings.”

Oliver Gilmartin, Royal Institute of Chartered Surveyors (RICS) senior economist warns that house buyers should be cautious about borrowing record volumes at a time when borrowing costs for both fixed and variable rate mortgages are likely to rise further.

“The current squeeze on disposable incomes will continue, making affordability levels deteriorate even further,” he said.

“Recent indicators confirm that the housing market is cooling with the Autumn and Christmas period likely to see more sluggish levels of activity, leading to an easing in price gains.”