The Council of Mortgage Lenders (CML) previously raised concerns that many more existing borrowers could find themselves trapped under the new rules.
The FSA has now altered its plans so that lenders would be able to "switch off" the requirements for existing borrowers who wanted to get a new mortgage for the same amount or less, provided they had a good repayment history.
The clampdown follows a period during the property boom when would-be buyers increasingly stretched their finances to get on the ladder.
The FSA has previously warned that a "ticking time bomb" has been created over the last 20 years, with an estimated 1.5 million interest-only loans worth around £120 billion due for repayment in the next decade.
Such deals allow borrowers to pay off the capital only when the mortgage term ends, but lenders have abruptly cut back on them amid concerns people cannot afford to pay them back.
The FSA is looking at how many interest-only borrowers will be unable to repay their loans and plans to publish its findings next spring.
We recognise that many lenders are now using a far more sensible set of lending criteria than before, but it is important that these common sense principles are hard-wired into the system to protect borrowers.
We want borrowers to feel confident that poor practices of the past, which led to hardship and anxiety, are not repeated.