The Financial Conduct Authority (FCA) has indicated it wants to introduce greater flexibility into the mortgage market by encouraging lenders to apply affordability assessments more proportionately. The objective is to support responsible lending while reflecting changes in employment patterns, income structures, and retirement realities.
For first-time buyers, strict affordability tests introduced in the aftermath of the global financial crisis have been widely criticised for limiting access to mortgages, particularly as house prices remain high relative to incomes. The proposed approach would allow lenders more discretion to assess borrowers’ financial circumstances, rather than relying solely on rigid stress-testing models.
Regulators believe this could help creditworthy buyers especially younger applicants with stable employment but limited deposits take their first step onto the property ladder.
The planned changes are also expected to benefit older borrowers, a group that has often faced difficulties securing mortgages due to age limits and conservative income assessments. With more people working beyond traditional retirement age and relying on diverse income streams, the FCA has acknowledged that current rules do not always align with modern financial realities.
Under the proposed framework, lenders would be better able to consider pension income, savings, and assets when assessing mortgage applications, potentially widening access to borrowing later in life.
The FCA has stressed that the changes are not intended to dilute consumer protections or reintroduce risky lending practices. Instead, the regulator says it is seeking to strike a balance between safeguarding borrowers and allowing lenders to exercise judgement in cases where applicants can clearly afford repayments.
Lenders will still be required to ensure mortgages are sustainable and suitable, in line with existing consumer duty obligations.
Industry participants have broadly welcomed the direction of travel, suggesting that greater flexibility could stimulate housing market activity and improve mobility. However, analysts have cautioned that any easing of rules must be carefully implemented to avoid increasing household debt or exposing borrowers to future interest rate shocks.
The FCA is expected to consult with lenders, consumer groups, and other stakeholders before finalising the proposed changes. Further details are anticipated in the coming months.
If implemented, the reforms would mark a significant shift in the UK’s mortgage framework, offering renewed opportunities for aspiring homeowners and older borrowers while seeking to preserve financial stability.
