The Financial Conduct Authority (FCA) has proposed changes aimed at helping first-time buyers, older borrowers and the self-employed get a mortgage.
Changes to mortgage laws will give lenders more flexibility to consider individual circumstances and develop products that better meet people’s needs while maintaining strong consumer protections.
The British financial watchdog’s plans include reducing barriers or lenders to offer flexible payments to people with variable incomes, such as the self-employed, and to lend to those paid in foreign currency.
The FCA says it will also encourage lenders to assess their affordability based on a person’s full and current situation, rather than automatically ruling people out because of minor or past credit history issues.
In addition, plans include making it easier for older homeowners to unlock their home equity by revising the retirement mortgage affordability guidelines.
Finally, it suggests revising the rules on interest-only (or partially interest-only) loans to give lenders more flexibility, while ensuring that most borrowers have a clear repayment plan.
These proposals, which are part of the ongoing work of the FCA, follow its plans announced in December last year to carry out reforms in the mortgage market to better meet the needs of consumers.
The FCA has asked consumers, firms and all interested parties to respond to the consultation and share their views by 28 July 2026.
The FCA’s chief executive of payments and digital finance David Geale says: “We are living longer and the number of people working is changing. Our mortgage rules must keep pace so that those who can’t pay can borrow. Strong safeguards mean we can now safely extend access to credit to those who may be underserved.”
Commenting further, Quilter mortgage expert Karen Noye says these proposals “acknowledge that the mortgage market has failed to keep pace with the way people live and work today, and allowing greater flexibility in assessing affordability and repayment would help prospective borrowers with complex incomes such as the self-employed.”
However, Noye highlights that there will be a “critical balancing act” when it comes to expanding access.
He says: “Loose rules around affordability and borrowing structures, particularly around interest-only or later-in-life borrowing can help improve access in the short term, but it will be important that borrowers don’t make unreasonable commitments that could impact further down the line.”
“We’ve seen a huge increase in people taking out mortgages that are paying off well into their retirement years, and this risks having a big impact on their financial security and quality of life when more of their income goes towards housing costs than they planned for.”
Meanwhile, Broadstone’s head of banking and credit advisers, Richard Pinch, says the proposals represent a “sensible change for the housing market”.
“The regulator wants to give lenders greater flexibility with an affordability test that better reflects a borrower’s actual behavior and lifetime income patterns.”
He adds: “Giving lenders more opportunity to consider an applicant’s full financial circumstances rather than relying on strict criteria should help increase access without jeopardizing consumer protection.”
“It may also support the use of a more advanced access model, supported by advances in data analysis and AI, which means that lenders should already consider how they can use these tools to better understand and serve customer needs.
“Importantly, the FCA is not proposing a return to the lax lending standards seen before the financial crisis. Instead, it wants to modernize the framework to reflect today’s labor market and demographics, while maintaining strong safeguards that have helped strengthen the resilience of the mortgage market.”
