The Financial Conduct Authority (FCA) has proposed changes that aim to help first-time buyers, older borrowers and the self employed get a mortgage.
The mortgage rule changes would give lenders more flexibility to consider individual circumstances and develop products that better meet people’s needs while maintaining strong consumer protections.
The UK’s financial watchdog’s plans include reducing barriers or lenders to offer flexible repayments for people with variable income, like the self-employed, and lend to those paid in foreign currency.
The FCA says it would also encourage lenders to assess affordability based on a person’s full and current situation, rather than automatically excluding people because of minor or past credit history issues.
In addition, plans include making it easier for older homeowners to unlock wealth built up in their property by updating affordability guidance for retirement interest-only mortgages.
Finally, it suggests updating rules on interest-only (or part interest-only) mortgages to give lenders more flexibility, while ensuring most borrowers have a clear plan to repay.
The proposals, which are part of the FCA’s ongoing work follows its plans announced in December last year to drive reforms to the mortgage market to better meet the needs of consumers.
The FCA has asked consumers, firms and all interested parties to respond to the consultation and share their views by 28 July 2026.
FCA executive director for payments and digital finance David Geale says: “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.”
Also commenting, Quilter mortgage expert Karen Noye says the proposals “acknowledge that the mortgage market has failed to keep pace with how people live and work today, and allowing greater flexibility in assessing affordability and repayments could help prospective borrowers who have more complex incomes such as the self-employed.”.
However, Noye highlights that there will be a “a delicate balancing act” when it comes to widening access.
She says: “Looser rules around affordability and lending structures, particularly around interest only offerings or borrowing later in life may help to improve access in the shorter term, but it will be vital that borrowers do not make unsustainable commitments that could impact them further down the line.”
“We have already seen a significant increase in people taking mortgages that they well be paying well into their retirement years, and this risks having a knock-on impact on their financial security and quality of life when more of their income is going on housing costs than they might have planned for.”
Meanwhile, Broadstone head of banking and credit advisory Richard Pinch says the proposals represent “a sensible evolution of the mortgage market”.
“The regulator is seeking to give lenders greater flexibility through affordability assessments that better reflect real borrower behaviour and lifetime earnings patterns.”
He adds: “Granting lenders more scope to consider an applicant’s full financial circumstances rather than relying on rigid criteria should help widen access without compromising consumer protection.”
“It could also support the use of more sophisticated affordability modelling, powered by advances in data analytics and AI, meaning lenders should already be considering how they can use these tools to better understand and serve customers’ needs.
“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.”
TMW Solicitors partner and head of lending department Julian Sampson comments: “There are still significant parts of the UK’s population who struggle to access competitively priced mortgages so any encouragement from the regulator which will support mortgage innovation should be welcomed.”
“The elderly and the self-employed are two critical markets that are expected to continue to grow. The tough economy of the last few years has meant a lot of people picking up minor marks against their credit histories that don’t reflect their current ability to service a mortgage.”
“The rise in credit repair lending is a necessary reflection of the economic climate, and having a regulator who can acknowledge the difficulties of adverse borrowers within a supportive and transparent framework can only be a positive sign that credit repair lending, managed well, must be a viable pathway for borrowers looking to move past previous credit issues.”
