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First-time buyers, the self-employed and older borrowers could soon find it easier to secure a mortgage under a package of reforms proposed by the Financial Conduct Authority, as the regulator moves to modernise lending rules to reflect changing working lives and demographics.
The FCA said it plans to simplify mortgage regulations and loosen restrictions on lenders to allow more flexible products, better suited to people with irregular incomes, later-life borrowing needs and non-traditional career paths. The changes are intended to support what the regulator described as “under-served consumers” and widen access to affordable home ownership.
Among the proposals, the FCA said it is reviewing rules around interest-only mortgages, with a view to making them more accessible for older borrowers, and will launch a focused market study into the lifetime mortgage sector to ensure it meets the needs of future customers.
The regulator also wants to encourage greater use of data and technology, including artificial intelligence, to help mortgage brokers deliver faster, more accurate advice, while retaining human oversight. In addition, it plans to simplify rules on mortgage advertising and disclosures so consumers can more easily understand information online.
David Geale, executive director for payments and digital finance at the FCA, said the reforms are designed to bring the mortgage market into line with modern realities.
“We want to widen access to affordable mortgages to meet the needs of consumers today,” he said. “Different working patterns and income levels at different stages of life need to be better reflected in how lenders assess affordability.”
The proposals follow pressure from government for regulators to support economic growth and build on steps the FCA has already taken this year to ease constraints in the mortgage market.
In March, the regulator clarified that lenders have flexibility in how they apply interest rate stress tests, the assessments used to judge whether borrowers could afford repayments if rates rise in future. The FCA had become concerned that some lenders were applying these tests too conservatively, unnecessarily restricting access to otherwise affordable mortgages.
Following that intervention, the FCA said lenders had widened borrowing options and that many borrowers could now access around £30,000 more than before.
Despite higher interest rates and rising living costs, the regulator noted that mortgage performance has remained strong. It said that 99 per cent of mortgages taken out since 2014, when lending standards were tightened, are not in arrears, and that the number of first-time buyers has held up even as house prices remain elevated.
As part of the review, the FCA will also examine ways to help people with uneven or unpredictable incomes, such as freelancers and the self-employed, get onto the housing ladder. It is also considering how borrowers who previously struggled with debt but have since improved their credit profiles could be better supported.
For older homeowners, the regulator is looking at how more of the wealth tied up in property could be accessed safely and fairly, particularly as concerns grow that people are saving too little for retirement.
Geale said: “As a society we’re saving too little for later life, yet people have huge wealth tied up in property. The mortgage market should be able to help unlock that wealth at the right time, offering fair value as part of a wider financial plan, not as a last resort.”
Specialist interest-only and later-life mortgage products could, he suggested, help retirees and older workers meet their financial goals without being forced to sell their homes.
In a speech last month, FCA chief executive Nikhil Rathi said the regulator had examined who was being “locked out of homeownership, why and for how long”.
He said the authority wanted to enable a “mortgage market of the future” that adapts to rapid changes in technology, employment patterns and demographics, while meeting consumer expectations, particularly in later life.
Rathi added: “Can some of the nation’s £9 trillion of housing wealth be unlocked more effectively and put to more productive use, particularly to sustain living standards in later life?”
The FCA will begin a public consultation on the proposed rule changes in early 2026, with the first reforms expected to come into force later in the year.
