The Financial Conduct Authority (FCA) has set out proposed reforms to mortgage lending rules aimed at making it easier for a wider range of people to access borrowing, including first-time buyers, self-employed workers and older homeowners.
The regulator said the changes are intended to give lenders more flexibility when assessing affordability, allowing them to better reflect individual financial circumstances while still maintaining core consumer protections.
Wider Approach to Affordability Checks
A key part of the proposals is a shift towards more flexible affordability assessments. Lenders would be encouraged to take a broader view of an applicant’s financial position, rather than automatically declining applications due to minor or historic credit issues.
The FCA also wants to improve access for borrowers with more complex income structures, including self-employed applicants and those paid in foreign currencies. This would allow lenders to take a more nuanced approach when reviewing income stability and repayment potential.
Changes for Later-Life and Interest-Only Borrowers
The regulator has also suggested updates to rules covering interest-only and retirement interest-only mortgages. These adjustments could give older borrowers more options when managing housing costs or releasing equity from their homes later in life.
According to the FCA, these changes are designed to reflect shifting demographics, including longer working lives and evolving employment patterns.
David Geale, executive director for payments and digital finance at the FCA, said that mortgage regulation needs to adapt to modern working and living trends. He added that stronger safeguards now make it possible to broaden access safely for borrowers who may previously have been excluded.
Part of a Wider Reform Programme
The proposals are part of a broader review of mortgage regulation first introduced in late 2025. The FCA’s aim is to ensure that lending rules are more aligned with current borrower needs while still protecting consumers.
The regulator has stressed that the planned changes will build on existing frameworks such as the Consumer Duty, ensuring lenders remain responsible while gaining more flexibility in how they assess applications.
Consultation Process Underway
The FCA is currently inviting feedback from lenders, consumers and industry stakeholders. It has also introduced an online tool designed to gather real-world experiences from borrowers about accessing mortgage finance.
The consultation will remain open until 28 July 2026. After this date, the regulator will review responses before deciding whether to move ahead with the proposed reforms.
Industry Response
Mortgage expert Karen Noye of Quilter said the proposals recognise that the housing market has not fully adapted to modern working patterns. She noted that more flexible affordability checks could help those with irregular incomes, particularly self-employed borrowers, who often face barriers under current rules.
However, she also highlighted the importance of balancing increased access with responsible lending. While greater flexibility may improve short-term affordability, there are concerns about borrowers taking on commitments that could become difficult to sustain over time, particularly later in life.
She added that anyone considering a mortgage or refinancing should seek professional advice to ensure decisions are suitable for their long-term financial wellbeing, as lending rules and market conditions continue to evolve.
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