Self-employed, older homeowners and those with variable income among groups set to benefit from proposed changes
The Financial Conduct Authority (FCA) has set out proposed changes to mortgage rules that could make it easier for self-employed borrowers, older homeowners, and those with variable income to obtain a mortgage.
The proposals, published as part of the regulator's ongoing work to modernise the mortgage market, would allow lenders more discretion in how they assess individual circumstances and structure products.
Key measures include reducing restrictions on flexible repayment arrangements for borrowers with variable or foreign-currency income, encouraging affordability assessments that reflect a borrower's current full financial situation rather than penalising minor or historical credit issues, updating guidance on retirement interest-only mortgages to enable older homeowners to draw on accumulated property equity more readily, and revising rules on interest-only and part interest-only mortgages to expand lender flexibility while retaining repayment plan requirements for most borrowers.
"We're living longer and how many people work has changed," said David Geale (pictured right), executive director for payments and digital finance at the Financial Conduct Authority. "Our mortgage rules need to keep pace so those who can afford to repay can borrow. Stronger protections mean we can now safely widen access to mortgage borrowing for those that may be underserved."
The FCA said the reforms build on improvements already made to market standards, including through the Consumer Duty, and aim to rebalance risk without removing core safeguards. The regulator is also gathering consumer views through an online tool to ensure borrower experiences inform the final approach.
"The FCA's proposals represent a sensible evolution of the mortgage market, recognising that traditional affordability assessments do not always reflect the realities of modern working patterns, income streams and borrowing needs," said Richard Pinch, head of banking and credit advisory at financial services consultancy Broadstone.
"The regulator is seeking to give lenders greater flexibility through affordability assessments that better reflect real borrower behaviour and lifetime earnings patterns. The proposals could be particularly beneficial for groups that have historically found it more difficult to access mortgage finance, including the self-employed, those with variable income and older borrowers."
"Importantly, the FCA is not proposing a return to the looser lending standards seen before the financial crisis. Instead, it is seeking to modernise the framework to reflect today's labour market and demographics, while retaining the strong safeguards that have helped underpin the resilience of the mortgage market."
The FCA is inviting responses from consumers, lenders, and other interested parties. The consultation closes on 28 July.
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