Updates to borrowing rules could see first-time buyers, older borrowers and the self-employed find it easier to get a mortgage, as the Financial Conduct Authority (FCA) acts on its ambitions to reform lending in the mortgage market.
Lending standards have significantly improved since the early 2000s, with over 99% of mortgages originated since 2014 still on track. But with house price growth outstripping wages, and evolving customer needs – including statistics which show working age people under-saving for retirement – many who could afford monthly repayments remain ineligible for mortgages.
The proposed changes would give lenders more flexibility to consider individual circumstances and develop products that better meet people’s needs, while maintaining strong consumer protections.
Changes include reducing barriers for lenders to offer flexible repayments for people with variable income, such as the self-employed; lending to those paid in foreign currency; encouraging lenders to assess affordability based on a person’s full and current situation, rather than automatically excluding people because of minor or past credit history issues; making it easier for older homeowners to access wealth built up in their property by updating affordability guidance for retirement interest-only mortgages; and updating rules on interest-only (or part interest-only) mortgages to give lenders more flexibility, while ensuring most borrowers have a clear plan to repay.
David Geale, executive director for payments and digital finance at the FCA, said: “We’re living longer and how many people work has changed. Our mortgage rules need to keep pace so those who can afford to repay can borrow. Stronger protections mean we can now safely widen access to mortgage borrowing for those that may be underserved.”
The proposals build on the foundation of Consumer Duty, the FCA said, which has played its part in raising standards across the mortgage market with the aim of “rebalancing risk to help more people access mortgages while keeping appropriate safeguards in place, including supporting consumers in understanding their options”.
Last year, FCA chief executive Nikhil Rathi called for bold shifts in the mortgage market, delivering a reminder to lenders about the flexibility within the stress test rules, and new rules which enabled consumers to extend mortgage terms and switch lenders more easily.
During the UK Finance Annual Mortgage Lunch last month, UK Finance CEO David Postings told reporters the “ecosystem of risk” had gone too far. Sharing the story of a single parent in Sheffield, he highlighted the absurdity of a mortgage market that refused to lend to an adult in full-time employment to enable her to buy her rented property, despite the mortgage repayments representing significantly less than her monthly rent.
Also speaking at the UK Finance event, Andrew Asaam, mortgage director at Lloyds Banking Group, said relaxation of regulations and stress tests has been welcomed, as “parental wealth entrenched the gap between the haves and have nots”. The banking industry “has an obligation to partner with government”, he added, and said the “reforms on the horizon” – including changes to the leasehold and planning systems – would mean “customers will see real change”.
Julian Sampson is partner and head of lending at TWM Solicitors. He said: “There are still significant parts of the UK’s population who struggle to access competitively priced mortgages so any encouragement from the regulator which will support mortgage innovation should be welcomed.
“The elderly and the self-employed are two critical markets that are expected to continue to grow. The tough economy of the last few years has meant a lot of people picking up minor marks against their credit histories that don’t reflect their current ability to service a mortgage.
“The rise in credit repair lending is a necessary reflection of the economic climate, and having a regulator who can acknowledge the difficulties of adverse borrowers within a supportive and transparent framework can only be a positive sign that credit repair lending, managed well, must be a viable pathway for borrowers looking to move past previous credit issues.
“The ageing population is creating an immovable lock up of equity as they are unable or unwilling to downsize without viable mortgage products to support them in doing so.
“If they were more easily able to downsize, they could release housing stock into the market and cash into the economy. The retirement interest-only mortgage has not been as popular as one might think, so any means of loosening the terms of this product must be welcomed.
“Ultimately, these changes will be welcomed by many of our specialist lender and building society clients who, time and again, are challenging the norm in how to lend to borrowers by structuring their lending in an innovative way without creating risks.”
Richard Pinch, head of banking and credit advisory at independent financial services consultancy Broadstone, said: “The FCA’s proposals represent a sensible evolution of the mortgage market, recognising that traditional affordability assessments do not always reflect the realities of modern working patterns, income streams and borrowing needs.”
He added: “Granting lenders more scope to consider an applicant’s full financial circumstances rather than relying on rigid criteria should help widen access without compromising consumer protection. It could also support the use of more sophisticated affordability modelling, powered by advances in data analytics and AI, meaning lenders should already be considering how they can use these tools to better understand and serve customers’ needs.
The FCA is encouraging consumers, firms and all interested parties to respond to the consultation and share their views by 28 July 2026.