The Financial Conduct Authority is inviting views on its mortgage rule review, which aims to boost home ownership and support growth. 

Those who could benefit from further changes to mortgage rules include first-time buyers, the self-employed and people borrowing into retirement. 

This is the second and more wide-ranging mortgage review the regulator has carried out this summer.

Areas of interest include the potential to update responsible lending rules to support wider access to sustainable home ownership and ensure the regulatory framework and market are prepared for the likely future increases in demand for later life lending. 

It will also look to introduce more flexibility to promote consumer understanding, information needs and innovation, while also rebalancing the collective risk appetite in mortgage lending. 

The work to reform mortgage rules was included in the FCA’s strategy, which commits the regulator to helping consumers navigate their financial lives and help growth. 

The measures were also included in a letter to the Prime Minister, which detailed changes to support economic growth.  

As part of this work, the FCA says it has talked to firms about the flexibility already available when checking if someone can afford a mortgage, which has in turn helped more borrowers access mortgages. 

While there are many factors at play when thinking about the future of the mortgage market, the watchdog says housing supply, social policy and wider economic conditions all impact affordable home ownership.  

The FCA highlights that any changes to its rules are only one part of the story. The regulator vows to “work with others to support access to home ownership to create an effective mortgage market where more borrowers who can afford to repay can access the mortgages they need”. 

FCA executive director for payments and digital finance David Geale says: “We want to evolve our mortgage rules to help more people access sustainable home ownership.  Having achieved higher standards in the market, now is the time to consider allowing more flexibility in a trusted market.”

“Changing our mortgage rules could make it easier for people to get onto the property ladder and manage mortgages into retirement.”

“We can’t solve all the issues related to home ownership. But we’re playing our part in helping people better use the mortgage market to navigate their financial lives and to encourage a dynamic, innovative and competitive market.”    

Feedback on the discussion paper will close on 19 September. 

Commenting on the FCA announcement, Broadstone senior director of risk Paul Matthews states: “The FCA’s mortgage rule review lays the groundwork for an easing of the regulatory and risk guidelines in order to boost homeownership.”

“Less than two decades on from the global financial crisis, a further reduction of mortgage requirements will sit uneasily with some, but the evidence points to low default rates and missed payments, with the regulator seeking to strike an appropriate regulatory balance.”

“In a volatile market environment, with fluctuating rates and economic headwinds, the mortgage sector has remained robust. The regulator will be looking to ensure it retains appropriate safeguards while removing any unnecessary obstacles to consumers fulfilling their financial objectives.”

Meanwhile, Fairer Finance managing director James Daley says: “The FCA’s latest discussion paper makes it clear that they understand the challenge and are ready to put the wheels in motion to break down the regulatory barriers.”

“We now need to see a public commitment from Government – as well as agencies such as the Money & Pensions Service – that they will play their part in breaking down the economic and social barriers that stand in the way of people using housing wealth in later life.

“There is a huge opportunity here – with the potential to unlock more than an additional £20bn of consumer spending a year by 2040. But Government and regulators must work together if we are to achieve this potential.”

With equity release being one of the government’s focus points, Equity Release Council chief executive Jim Boyd states: “The discussion paper recognises that mortgage products targeted at older borrowers, whether lifetime, retirement interest-only or other forms of mortgage are increasingly mainstream.”

“Two in five UK residents are already over 50 years old and in 15 years’ time half of UK households are anticipated to need to use housing wealth to support their spending needs in later life.”

“To help people better navigate their financial lives, we need to ensure that people understand their options and have the products and protections in place to make confident choices.”

“Reflecting this, [the] announcement invites views about how advice qualifications might evolve to enable ‘enhanced advice’ to support consumers make informed decisions.

“While we have seen significant innovation over the last five years, the announcement encourages the industry to continue to challenge itself to adapt to support a broader range of customers who have different needs and aspirations.”

“The Equity Release Council looks forward to engaging with the FCA public discussion and helping members to make their voices heard as part of this important debate.”

Also weighing in, the Building Societies Association head of mortgage and housing policy Paul Broadhead adds: “Since the financial crisis, it is clear that the regulatory pendulum has swung too far towards caution, prioritising detailed rules at the expense of access to the benefits of homeownership for many creditworthy families.”

“We therefore welcome the Financial Conduct Authority’s (FCA’s) Discussion Paper exploring the future of mortgage lending for all types of borrowers. Alongside the Government’s promised long-term housing strategy, this review provides a crucial opportunity to shape the UK mortgage market for the next decade and beyond.”

“Over the summer we will engage with our members and carefully consider our response. I expect some very lively discussions as we explore both the risks and opportunities across all areas of mortgage regulation.”

“In doing so, it’s important that we don’t jeopardise the consumer confidence and trust we have built in the mortgage market since 2008, but we must be radical and ambitious in our thinking to ensure we achieve a framework that enables us to support more people on their homeownership journey both now and in the future.”