Rules on mortgages could be eased, potentially making it easier for borrowers.
The Financial Conduct Authority (FCA) said it wants to simplify mortgage requirements and “open a discussion” about access to lending to help more home buyers secure a property.
Here, Yahoo News UK looks at why the regulator is talking about making the changes, and what they could mean.
Why is the FCA considering relaxing rules?
In December, the government asked the UK’s main regulators to provide “concrete proposals” on how they could boost economic growth.
Relaxing mortgage lending rules was one of the FCA’s suggestions in its response to the government on Friday.
Chief executive Nikhil Rathi said the FCA, which has a stated aim to reduce the “regulatory burden”, would: “Begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults.”
He said it would also work with the government to remove “overlapping standards” such as the Mortgage Charter. Many lenders signed up to the charter to help borrowers struggling with their repayments amid the higher mortgage rate environment, although banks and building societies were already offering various forms of support.
Mortgage lending rules were toughened after the 2008 financial crisis to make sure there could be no return to irresponsible lending.
What does this mean for borrowers?
Matt Smith, a mortgage expert at property website Rightmove, said the FCA’s proposals would be a boost for first-time buyers.
“It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like. Regulatory change is what we’ve been calling for, as that is what is needed to truly impact home mover affordability, particularly for first-time buyers.
“We’ve seen some innovative products and schemes announced by lenders to try and do their bit to support home-buyers, but they need support from both the government and regulators to really drive more options for people.”
Charles Roe, director of mortgages at banking and finance industry body UK Finance, also said: “Reviewing the mortgage lending rules would help with affordability issues, not just for first-time buyers but also those looking to move further up the housing ladder.
“Banks will always lend responsibly but the current rules are restricting the number of people who can get a mortgage and so could be relaxed.”
According to the Bank of England’s latest figures, the number of mortgage approvals in November last year dipped to 65,700, which was around 2,400 lower than in October. However, it was above the previous 12-month average of 60,400.
In August 2022, shortly before Liz Truss’s reign as prime minister, 72,200 mortgages got the green light.
What deposit to I need to get a mortgage?
Typically, lenders require a deposit of at least 5% of the property’s value, while a larger deposit will generally result in a lower interest rate on the mortgage.
Analysis last year found someone newly getting onto the property ladder can expect to pay around £400 more per month for their mortgage than they would have five years ago.
Calculations by Rightmove suggested the average first-time buyer mortgage payment has risen by 61% since 2019, from £667 to £1,075 per month.
It called for the government to “address the difficulties of saving up a large enough deposit and being able to borrow enough from a lender”.