The Financial Conduct Authority (FCA) has proposed new measures that could make it easier for first-time buyers, older borrowers, and the self-employed to obtain a mortgage. The regulator will explore ways to help lenders offer flexible repayment options for individuals with variable incomes, such as those who are self-employed. Currently, self-employed individuals often face challenges securing mortgages due to the absence of a consistent monthly payslip, making risk assessment more difficult for lenders.
Key Proposals
The FCA will also consider rule changes to encourage lenders to evaluate a borrower's current and overall financial situation rather than automatically rejecting those with past credit issues. Additionally, the regulator aims to update rules on interest-only mortgages, providing lenders with more flexibility while ensuring borrowers have a repayment plan unless they borrow a smaller amount. Interest-only mortgages require borrowers to pay only the interest during the loan term, with the principal repaid at the end. These loans have been controversial historically due to some borrowers lacking the means to repay the original amount.
Support for Older Homeowners
The proposals also seek to make it easier for older homeowners to access equity in their properties by updating affordability guidance for retirement interest-only mortgages. The FCA wants lenders to adopt a more individualized approach to assessing creditworthiness. A public consultation is open until July 28, and the regulator is using an online tool to gather feedback on mortgage market experiences.
Industry Reactions
David Geale, executive director for payments and digital finance at the FCA, stated: "We're living longer and how many people work has changed. 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." Sarah Coles, head of personal finance at AJ Bell, commented: "Mortgages are just one part of the picture. A healthy housing market also needs enough affordable properties, plus tax rules that don't distort buyer behaviour and put people off. The flow of first-time buyers also depends on people being able to build healthy deposits. This can be a huge challenge when they're also having to cover the cost of sky-high rents."
