The proposals would also benefit self-employed and older homeowners, while greater protections would be available for vulnerable borrowers
The financial watchdog has set out plans for an overhaul of the mortgage market – and says it could help first-time buyers get on to the housing ladder.
The proposals would also benefit self-employed and older homeowners, while greater protections would be available for vulnerable borrowers.
The Financial Conduct Authority (FCA) is looking at four key areas as part of its mortgage overhaul. This includes simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.
This would benefit first-time buyers and self-employed Brits, who can struggle to get a mortgage due to fluctuating earnings.
The FCA also wants to review retirement interest-only requirements for people who have a mortgage in retirement. It will also review ways it can offer more protection for vulnerable customers, including those who are affected by financial abuse.
Finally, the FCA says it wants to encourage the use of data and technology, such as AI, to help brokers give better and faster advice while keeping a human touch.
The FCA will start to consult the public from early 2026 with the aim of having the first changes in place later that year.
David Geale, executive director for payments and digital finance at the FCA, said: “We have worked at pace this year to improve outcomes for customers wanting a mortgage.
“We’ll use insight from consumers and industry to drive further reforms and rebalance risk – helping to widen access to affordable mortgages to meet the needs of consumers today.
“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.”
The FCA first announced it is looking into simplifying mortgage rules earlier this year. Mortgage lending rules were toughened in 2015 after the 2008 financial crisis.
Since then, many of the major banks have reduced the stress-test rates borrowers are checked against, which looks at whether they can afford to continue to pay their mortgage if interest rates rise.
Different types of mortgages explained
If you have a tracker mortgage, it means your deal and monthly repayments move in line with the Bank of England base rate. A tracker mortgage usually tracks above the base rate.
If you have a standard variable rate (SVR) mortgage then your deal can change at any time, though they do roughly tend to move in line with the base rate too.
SVRs are generally the most expensive type of mortgage. If you have a fixed rate mortgage, it means you have agreed to pay a fixed amount each month for a set period of time.
You are normally moved to your lender’s SVR when your fixed deal ends. If your mortgage is due to expire, you should compare rates now and speak to a mortgage broker to look at your options.
Generally speaking, lenders let you secure a new deal around three months in advance. If rates come down, you may be able to cancel the deal you’ve agreed to and sign up to a cheaper rate – but check with your lender before signing up first to see if there are any fees.