The Financial Conduct Authority challenged lenders to “rebalance” how they view risk by looking at savings when weighing up mortgages and unlocking the later life home wealth market.  

FCA director of retail banking Emad Aladhal said that although the mortgage market is “resilient,” it has become an area “that some creditworthy people can struggle to access”. 

Aladhal’s comments came at the UK Finance annual mortgage Lunch in London yesterday, ahead of a speech by UK Finance chief executive David Postings. 

The regulator said: “Affordability has been stretched, with increasing numbers of consumers borrowing for longer, and many projected to be repaying their mortgage into later life.  

“In the years to come, holding mortgage debt into retirement will no longer be a niche, but increasingly the norm.  

“Has safety come at the expense of access to creditworthy borrowers? Has the right balance been struck?” 

“And if the market was to adapt its risk appetite – to widen access further – how could we do so without compromising the overarching principle to lend responsibly?” 

The watchdog has promised its second summer review in June will be a wide-ranging paper “on the future of the mortgage market and conduct regulation”.     

The FCA has said the review will cover: 

• the market’s collective appetite for risk, and how we might approach managing changes to risk appetite  

• how we can create space for innovation, for example, through changes to affordability assessments  

• how customers are supported to access the market and make the right choices, for example, through changes to our disclosure requirements 

• how we ensure we are all prepared for an increase in demand for later life lending 

Yesterday, Aladhal asked lenders to consider “how to assess affordability and default risk in ways that could support more customers gaining access to lending. 

He added: “How could a customer’s savings track record – either through cash savings, ISAs or their pension – form part of their risk profile when applying for a mortgage?” 

The regulator also urged lenders to take a fresh look at the equity release market. 

He pointed out: “Housing is a significant store of value: there is around £9.1tn embodied in this country’s housing stock – and for the current cohort of retirees, outright ownership is the fastest growing tenure.  

“Should we be prepared to support more older homeowners to access their housing wealth? 

“Importantly, where a mortgage of some kind is the right option in later life – how could it be made more attractive and offer greater value?” 

Aladhal added: “We are already listening and considering carefully where to target our efforts to deliver a more innovative and accessible market.”