The Financial Conduct Authority has published proposals to reform mortgage lending rules, aiming to expand access for first-time buyers, self-employed workers and older borrowers. The regulator said the changes would allow lenders more flexibility in affordability assessments while maintaining consumer protections.
The proposals include measures to help lenders evaluate applicants with variable incomes, including self-employed individuals and those receiving foreign currency payments. The FCA also wants lenders to adopt broader affordability assessments rather than automatically excluding borrowers due to minor or historic credit issues.
Retirement and interest-only mortgages
The regulator has proposed updates to rules governing retirement interest-only and interest-only mortgages, which it says could provide older homeowners with greater flexibility when accessing housing wealth or arranging later-life borrowing. The move follows recent shifts in borrower behaviour as market conditions continue to evolve.
David Geale, executive director for payments and digital finance at the FCA, said: “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.”
Market implications
The proposals form part of the FCA’s wider mortgage market reform programme, first outlined in December 2025. The changes would build on existing consumer protections, including the Consumer Duty, while giving lenders greater flexibility to assess risk and serve a wider range of customers.
Karen Noye, mortgage specialist at Quilter, said the proposals acknowledge that the mortgage market has failed to keep pace with how people live and work today. She noted that allowing greater flexibility in assessing affordability could help prospective borrowers with complex incomes. However, she cautioned that looser rules around affordability and lending structures, particularly for interest-only offerings or later-life borrowing, could lead to unsustainable commitments.
The consultation includes an online tool for borrowers to provide evidence about their experiences of the mortgage market. The reforms could have implications for property development financing and broader housing market dynamics as lending criteria evolve.
The consultation remains open until 28 July 2026, after which the FCA will review responses before deciding whether to implement the proposed changes.
