The Financial Conduct Authority (FCA) is reviewing UK mortgage lending rules to improve access to home ownership, especially for first-time buyers, the self-employed, and older borrowers.
As part of this review, the FCA published a discussion paper aiming to make mortgage products more flexible and accessible. This is a significant move as the regulator looks to support long-term economic growth by ensuring that more people can buy homes that suit their circumstances.
Key Areas Under Review
The FCA’s proposed updates cover multiple aspects of responsible lending. They want to make borrowing more adaptable for people with fluctuating incomes — such as those who are self-employed or work on short-term and zero-hours contracts — as well as for borrowers later in life.
Key areas include:
Responsible lending — ensuring lenders make fair assessments while keeping standards high.
Later-life borrowing — addressing the growing need for affordable options for people aged 50 and up.
Consumer understanding — helping borrowers make informed choices by improving guidance and communication.
Encouraging innovation — welcoming new mortgage products to meet diverse needs.
As David Geale, executive director at the FCA, noted:
“We want to evolve our mortgage rules to help more people access sustainable home ownership.”
Additionally, the FCA is rethinking the stress test — a measure that requires lenders to check a borrower’s capacity to pay if interest rates rise — to see if this can be adapted for people whose income patterns don’t fit traditional employment.
Supporting Older Borrowers
The FCA highlighted that 38% of working-age people are projected to under-save for retirement. Given that housing wealth is becoming an important retirement funding option, tailored products for later-life borrowers, such as retirement-interest-only mortgages and equity release, will also be a focus.
Jim Boyd, CEO of the Equity Release Council, supported these changes:
“With two in five UK residents aged over 50 and with 50% of UK households predicted to need to use housing wealth in the future, we need a better understanding of their options and protections.”
Balancing Opportunity with Responsibility
While the aim is to encourage lenders to innovate, the regulator is mindful of balancing flexibility with sustainability. Responsible lending requirements were tightened after the 2008 financial crisis, leading to a more stable mortgage market with fewer borrowers in arrears.
Matt Smith, Rightmove’s mortgage commentator, welcomed the FCA’s proactive approach:
“The desire to support more people in achieving their home-ownership aspirations needs to be balanced against the potential risks of allowing people to borrow more. This balance is complex.”
He also pointed out that renters often pay 41% more in rent than they would on a mortgage, making the need for affordable borrowing options for first-time buyers especially urgent — particularly in high-cost areas like the South of England.
Conclusion
With ongoing consultation and input from lenders, advisers, and the public, these proposed mortgage rule updates could help a wider range of people achieve their goal of home ownership — responsibly and sustainably.
