The Financial Conduct Authority (FCA) has unveiled a package of proposed mortgage reforms designed to make borrowing more accessible for first-time buyers, older borrowers and self-employed applicants, while maintaining consumer protections.
The regulator says its plans would give lenders greater flexibility to assess individual circumstances and develop products better suited to modern borrowing needs, reflecting changing employment patterns, longer working lives and evolving consumer expectations.
Among the proposals are measures to make it easier for lenders to offer more flexible repayment structures for borrowers with variable incomes, including self-employed customers, as well as those paid in foreign currencies.
The FCA also wants to encourage firms to take a more rounded view of affordability by considering a borrower’s full and current financial position, rather than automatically excluding applicants because of historic or relatively minor credit issues.
AFFORDABILITY CHANGES
In a move likely to be welcomed by later-life lending specialists, the regulator is also proposing changes to affordability guidance for retirement interest-only (RIO) mortgages, aimed at helping older homeowners unlock housing wealth built up over many years.
Further reforms would update rules around interest-only and part interest-only lending, giving lenders greater flexibility while ensuring most borrowers continue to have a clear and credible repayment strategy in place.
The proposals form part of the FCA’s wider programme of mortgage market reform, first outlined in December 2025, which seeks to ensure regulation reflects the realities of today’s housing market and workforce.
“We’re living longer and how many people work has changed.”
David Geale (main picture, inset), Executive Director for Payments and Digital Finance at the FCA, 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.”
HIGHER STANDARDS
The regulator stresses that the proposals build on higher standards introduced across the mortgage market in recent years, including the Consumer Duty, rather than representing a relaxation of protections.
Instead, the FCA said the changes are intended to rebalance risk and improve access to homeownership and later-life borrowing opportunities while maintaining appropriate safeguards.
Alongside the consultation, the FCA has launched an online feedback tool to gather views directly from consumers about their experiences of the mortgage market. Responses from consumers, lenders, brokers and other stakeholders will help shape the final rules.
The consultation is open until 28 July 2026, with the mortgage industry expected to scrutinise the proposals closely given their potential impact on affordability assessments, product innovation and access to borrowing.
HOLISTIC APPROACH
Karen Noye, mortgage expert at Quilter, says: “The proposals from the FCA 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.
“Current affordability assessments can be limiting for those looking to get onto the property ladder, and a shift towards a more holistic approach whereby someone’s full current financial situation is considered, rather than historical credit issues immediately closing the door to homeownership, would be a positive step forward.
BALANCING ACT
She adds: “However, there will naturally be a delicate balancing act when it comes to widening access.
“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.”
