First-time buyers, self-employed individuals, and those borrowing into later life may soon benefit from potential changes to mortgage lending rules. The Financial Conduct Authority (FCA) has launched a discussion paper to spark a public conversation about how the mortgage market could evolve to better support consumers.
The paper explores where rule changes might promote broader access to sustainable homeownership, while also helping economic growth. It also highlights the potential for lenders to offer more flexible products tailored to customers’ varying needs.
David Geale, the FCA’s executive director for payments and digital finance, said the aim is to open up a national conversation about the future of mortgage lending. Speaking to the PA news agency, he said: “We’re starting a public conversation on the future of the mortgage market, to see what we can do to help consumers navigate their financial lives and to support growth.”
Geale noted that the discussion paper is only the first step and is meant to explore how the industry can balance risk and opportunity. “Here are some thoughts, where should we be on the spectrum of balancing risk versus opportunity?” he said.
The regulator is particularly interested in improving access for groups who may currently face challenges under the existing system. This includes the self-employed, individuals with fluctuating or unpredictable incomes, and people in vulnerable situations. These borrowers may, in fact, be good candidates for a mortgage, but rigid rules often prevent lenders from assessing their circumstances more broadly.
Geale explained that society has changed, especially in how people earn and live, and the lending market should adapt accordingly. He pointed out that people renting long-term or those with significant home equity later in life could benefit from fairer mortgage assessments—especially when income is the only barrier.
The FCA is also considering whether regular rent payments could be used as evidence of affordability. “If you’ve been paying rent on a regular basis, had no problem paying your rent, and a mortgage would actually be cheaper, well, could we be more explicit about the ability to take that into account?” Geale asked.
As part of this process, the FCA will review feedback from the discussion and then decide whether changes to the current rules are needed. While there’s no formal policy shift yet, Geale described this step as “an exciting way into” the broader debate.
He emphasised that the FCA intends to move quickly where possible and has already taken action in areas where it believes immediate change is justified.
According to FCA data, the trend towards longer mortgage terms continues to rise. In 2024, more than two-thirds—around 68%—of first-time buyers took out mortgages lasting 30 years or more. This highlights how stretched affordability has become and underlines the importance of ongoing review and reform.
The discussion paper highlights how employment patterns in the UK have changed significantly compared to those of previous generations. It points out a growing reliance on short-term contracts, zero-hours arrangements, and self-employment, which can all present challenges when it comes to securing a mortgage.
In response, the Financial Conduct Authority (FCA) is calling for public feedback on what further changes might be needed to improve mortgage access for people with variable incomes—whether they’re self-employed or nearing retirement. The aim is to ensure that both home buyers and older borrowers are not unfairly excluded from the mortgage market due to outdated lending criteria.
One of the key areas under review is the mortgage stress test. This test requires lenders to assess whether a borrower would still be able to afford repayments if interest rates were to rise. At present, lenders are responsible for setting their own stress rates.
However, the paper proposes the idea of introducing a standardised central stress rate, supported by a forecasting model that would be reviewed and updated at regular intervals. While this could make the system more consistent, the paper also acknowledges potential downsides—such as limiting lenders’ ability to adapt stress testing based on different mortgage products or borrower circumstances.
Another important focus is how homeowners can better access the wealth tied up in their property to support themselves during retirement. With around 38% of working-age adults expected to under-save for retirement, the FCA suggests that improved mortgage access could play a crucial role in helping people meet their financial goals later in life.
Currently, many lenders are willing to consider earned income up to the age of 75 when assessing affordability. This shift reflects a growing recognition that people are working for longer and may still have the capacity to manage repayments in later life.
Despite this, products specifically designed for older borrowers are often more costly than standard mortgages. Additionally, there is concern that older homeowners may not be aware of the full range of borrowing options available to them.
The FCA is keen to ensure that its existing rules do not unintentionally block innovation in this space. For instance, equity release products that allow retirees to access funds monthly—rather than in a single lump sum—could be more affordable and flexible for those without stable income sources in retirement. These types of products, the paper suggests, could offer a practical solution for certain borrowers if regulatory barriers are addressed.
The Financial Conduct Authority (FCA) has outlined a range of potential reforms in its wide-reaching discussion paper, which aims to explore how the mortgage market can better serve consumers across the UK.
Among the ideas being considered is whether the regulator should play a more active role in encouraging the use of long-term fixed-rate mortgages. These types of loans, which offer interest rate stability for a longer period, could provide borrowers with greater certainty and help shield them from market volatility.
Another key topic is whether assessing a borrower’s affordability based on their rental history could serve as a responsible and practical alternative to traditional income-based assessments. This would potentially benefit long-term renters who have a consistent track record of making rental payments, but who struggle to meet current lending criteria.
The FCA is also inviting views on whether it should offer more support for “part and part” mortgages. These arrangements allow borrowers to split their loan between interest-only and capital repayment, potentially offering greater flexibility for those with irregular incomes or specific financial goals.
Particular attention is being given to whether revisions to interest-only mortgage rules could make it easier for first-time buyers to get on the property ladder. In today’s climate of rising house prices and affordability challenges, easing access to alternative lending options could open the door to more aspiring homeowners.
The regulator is also seeking input on how it might assist survivors of economic abuse—particularly individuals who remain tied to a joint mortgage with an abusive partner. This highlights a growing awareness of the need for financial systems to better support vulnerable consumers.
Beyond individual circumstances, the FCA is turning its attention to wider societal challenges, such as climate change. It’s exploring whether there are any regulatory actions within the mortgage market that could contribute to environmental goals, possibly by encouraging lenders to offer greener mortgage products or energy-efficient property incentives.
According to the FCA, there are currently around 8.96 million regulated mortgage accounts across the UK. In addition, approximately 3.6 million households are renting but aspire to own a home in the future—a figure that demonstrates the scale of potential demand.
Following the 2008 financial crisis, mortgage lending rules were made more stringent in order to create a more stable market. This has led to positive outcomes, such as fewer borrowers falling into arrears and more than 99% of mortgages originated since 2014 being on track for successful repayment.
However, the paper also acknowledges the downsides of this cautious approach. It notes that these tighter rules may have unintentionally made it harder for some consumers to access the mortgage market—particularly as house prices have risen far more quickly than wages in recent years. For many people without financial help from family, the dream of homeownership remains out of reach.
The regulator accepts that increasing numbers of people are struggling to meet affordability criteria, gain mortgage approval, and ultimately purchase a home. While it may propose changes to lending rules in the future, it has stressed that any reforms will be considered carefully and in line with its ongoing commitment to the Consumer Duty—ensuring that firms always prioritise the interests of their customers.
Maintaining high standards and monitoring trends across the market will continue to be central to the FCA’s approach. It expects a broad range of stakeholders to engage with the discussion paper, including lenders, brokers, trade organisations, consumer advocacy groups, current homeowners, and prospective buyers.
The consultation will remain open until 19th September. After that point, the FCA will consider the feedback received before making any formal recommendations for rule changes. In the meantime, its focus remains on ensuring both consumers and the market as a whole are protected.
Industry figures have already reacted positively to the discussion paper. Matt Smith, mortgage expert at Rightmove, welcomed the FCA’s efforts to open up dialogue on targeted regulatory changes. He noted the potential benefits for first-time buyers who can afford to borrow responsibly and the opportunity to promote sustainable homeownership.
Smith also pointed out that regional differences must be taken into account. Property price gaps between earnings and house values are particularly stretched in southern England, compared to more balanced ratios in the north, Scotland, and Wales. He stressed the importance of finding the right balance between expanding access to mortgages and maintaining responsible lending practices.
“This balance is complex,” he said, “and is why we welcome the FCA’s approach to open up a wide-ranging discussion on what is right.”
Charles Roe, director of mortgages at UK Finance, echoed this sentiment. He praised the FCA’s recognition that changes are needed to support long-term, sustainable homeownership and stimulate economic growth. Roe emphasised that while mortgage firms will always lend responsibly, there is still room for reform. He added that UK Finance looks forward to working with members to identify practical ways that regulatory rules can evolve to help more people buy, move, or downsize their homes.
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