First-time buyers, self-employed workers and older borrowers may soon find it simpler to secure a mortgage, as the City watchdog looks to update lending rules to better reflect how people live and work today. The proposals aim to bring mortgage regulation in line with modern employment patterns, longer working lives and changing financial needs.
The Financial Conduct Authority (FCA) said it wants to support what it calls the “mortgage market of the future”. This would be a market that responds more effectively to developments in technology, shifts in demographics and evolving expectations around home ownership across different stages of life.
Formal consultation on the proposed changes is expected to begin in early 2026, with the regulator aiming to introduce the first set of rule updates later that same year.
The FCA’s work will focus on four main priorities. These include improving access for first-time buyers and groups that are currently underserved, expanding later-life lending options, encouraging innovation and clearer disclosure, and strengthening protections for vulnerable customers.
Alongside this, the regulator plans to launch a dedicated market study into later-life lending. This review will explore how the sector could evolve to meet a wider range of borrower needs, with detailed terms expected to be published in the first quarter of next year.
Looking further ahead, the FCA expects more homeowners to continue borrowing beyond state pension age. With many people not saving enough for retirement, later-life mortgage products could play an increasingly important role in helping individuals meet their long-term financial goals.
As part of its review, the regulator will consider simplifying existing mortgage rules to allow for more flexible products. These would be designed to better reflect varied income patterns, including freelance work, self-employment and changes in earnings over time.
The FCA is also exploring ways to improve financial advice, particularly around planning for later life. Ensuring that lifetime mortgages and similar products remain suitable and well-understood will be a key part of this work.
Technology is expected to play a larger role too. The regulator has indicated that tools such as artificial intelligence could help mortgage advisers deliver quicker and more tailored guidance to borrowers.
In addition, the FCA wants to make advertising and disclosure requirements clearer and easier to understand, particularly for online information. The aim is to help consumers make more informed decisions when comparing mortgage options.
The watchdog also plans to work alongside other organisations to better support people affected by financial abuse and those using mortgages as a way to manage or consolidate existing debts.
Feedback published from the FCA’s recent discussion paper showed broad agreement that some groups of first-time buyers are not being adequately served. These include those without access to large deposits, family support or stable income histories.
The regulator highlighted challenges faced by self-employed borrowers, people with irregular or contract-based earnings, those recovering from significant life events, and individuals with overseas income or past credit issues.
One area under review is the treatment of interest-only mortgages. The FCA is considering whether its current rules should be updated to better support certain first-time buyers, particularly where interest-only forms part of a broader repayment strategy.
Although interest-only mortgages for first-time buyers have made up less than 0.5% of all sales since 2013, feedback suggests that combining repayment and interest-only elements could help some buyers get onto the property ladder sooner.
The regulator noted that part interest-only products are currently assessed in the same way as fully interest-only mortgages. It is now considering whether a different affordability approach could be applied to these mixed products.
Industry responses have also encouraged the FCA to widen what qualifies as an acceptable repayment strategy. This could include greater consideration of later-life mortgage options, particularly for middle-aged borrowers who may struggle to meet full repayment terms.
Some organisations have pointed to so-called “low start” mortgages as another possible solution. These products typically begin as interest-only and switch to repayment after a set period, making them more suitable for borrowers expecting strong future income growth.
The FCA is also reviewing how rental payment data could be used more widely in affordability checks. This approach could help renters build stronger credit profiles and improve their chances of securing a mortgage.
According to the regulator, the UK is among the global leaders in integrating rental payment data into lending decisions, alongside the United States.
The FCA has already seen changes in the market following clarification of mortgage stress test rules earlier this year. In March, lenders were reminded of the flexibility available when assessing affordability under higher interest rate scenarios.
Since then, many lenders have adjusted their criteria, with the FCA estimating that around 85% of the market can now offer borrowers roughly £30,000 more than before, potentially helping more first-time buyers purchase a home.
David Geale, executive director for payments and digital finance at the FCA, said the regulator has moved quickly to improve outcomes for mortgage customers and will continue to work with both consumers and the industry to widen access responsibly.
He added that reforming the mortgage market could also help address the wider issue of under-saving for later life, particularly given the large proportion of household wealth tied up in property.
Despite higher interest rates and rising living costs, the FCA noted that mortgage arrears remain very low. Around 99% of mortgages taken out since tighter standards were introduced in 2014 are not in arrears.
Aneisha Beveridge, head of research at Hamptons, said first-time buyers are increasingly buying later in life and choosing homes they can stay in long term, rather than using them as temporary stepping stones.
She added that recent changes have helped higher-income and single buyers in particular, but further steps to widen access would be welcomed.
Zara Bray, mortgage distribution director at Quilter Financial Planning, said demand for later-life lending is expected to rise sharply as more people reach retirement with outstanding mortgage debt.
She noted that the current market will need to grow and improve communication if it is to meet future demand effectively.
Mary-Lou Press, president of NAEA Propertymark, said the proposals reflect a growing recognition that mortgage rules must adapt to modern working lives.
She added that greater flexibility for first-time buyers, the self-employed and those with non-traditional income could help unlock home ownership for groups that have long been overlooked, provided strong consumer protections remain in place.
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