First-time buyers, the self-employed and older borrowers could find it easier to secure a mortgage under proposed reforms from the UK’s financial regulator, designed to make lending rules more flexible and better suited to modern working lives.
The Financial Conduct Authority (FCA) has outlined plans to simplify mortgage regulations and loosen some restrictions on lenders, allowing them to offer products that better reflect “different working patterns and income levels at different stages of life”. The regulator said the changes would help first-time buyers and other “under-served consumers” gain access to home ownership.
As part of the proposals, the FCA is also reviewing its approach to interest-only mortgages, with a view to making them more accessible for older borrowers. It said it would launch a focused market study into whether the lifetime mortgage market is equipped to meet the evolving needs of future customers.
The regulator also plans to encourage greater use of data and technology, including artificial intelligence, to help mortgage brokers provide “better and faster advice while keeping a human touch”. In addition, it will examine how to simplify mortgage advertising and disclosure rules so that consumers can more easily understand information online.
David Geale, executive director for payments and digital finance at the FCA, said the aim was to “widen access to affordable mortgages to meet the needs of consumers today”.
Public consultation on the proposed changes is expected to begin early next year, with the FCA aiming to introduce the first reforms later in the year.
The proposals follow pressure from the government on regulators to help support economic growth. The FCA has already moved this year to relax aspects of the mortgage affordability framework.
In March, the regulator told lenders there was flexibility in how they applied interest-rate stress tests, the checks used to assess whether borrowers could still afford repayments if rates rise in future. The FCA said some lenders had been overly cautious, unnecessarily restricting access to mortgages that were otherwise affordable.
Following the intervention, the regulator said lenders had widened borrowing options, enabling many borrowers to access around £30,000 more than before. It also noted that despite higher interest rates and rising living costs, 99 per cent of mortgages taken out since tighter lending standards were introduced in 2014 are not in arrears, and that first-time buyer numbers have remained resilient.
Further reforms under consideration include measures to help people with uneven or irregular incomes, such as the self-employed, as well as those who have previously experienced debt problems but have since improved their credit profiles.
For older homeowners, the FCA is exploring ways to help people unlock more of the wealth tied up in property to support later-life living standards.
“Reforming the mortgage market can help address the fact that, as a society, we’re saving too little for later life, yet people have huge wealth tied up in property,” Geale said. He added that specialised interest-only mortgages aimed at those in retirement could help people meet their financial goals as part of a broader financial plan.
In a speech last month, FCA chief executive Nikhil Rathi said the regulator had examined who was being “locked out of homeownership, why and for how long”.
He said the FCA wanted to enable a “mortgage market of the future” that adapts to changing technology, employment patterns and demographics, particularly as consumers live and work for longer.
Rathi questioned whether some of the UK’s estimated £9 trillion of housing wealth could be “unlocked more effectively and put to more productive use”, adding that the mortgage market should help people access that wealth “at the right time, when it’s needed, offering fair value, not as a last resort”.
