First-time buyers, the self-employed and
people borrowing into retirement could benefit from further
possible changes to mortgage rules.
The FCA is seeking a
public conversation on the future of the mortgage market as part
of its work to help consumers navigate their financial lives and
to support economic growth.
Areas
include:
-
Potential to update responsible
lending rules to support wider access to sustainable home
ownership.
-
Ensuring the regulatory framework
and the market are prepared for the likely future increases in
demand for later life lending.
-
Introducing more flexibility to
promote consumer understanding, information needs, and
innovation.
-
Rebalancing the collective risk
appetite in mortgage lending.
David Geale, Executive
Director for Payments and Digital Finance,
said:
“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.”
The mortgage market has changed
considerably over recent years. First time buyers are older and
borrowing for longer, including into later life.
The FCA's data shows that in 2024, 68%
of first-time buyers borrowed for terms of 30 years or
longer. Homeowners will also
increasingly need to access their housing wealth to provide for
their needs during retirement.
Home ownership has become an
increasingly challenging aspiration for many, with more people
renting for longer periods of time. Those that do rent, face
higher housing costs and less security. The FCA's Financial Lives
2024 survey shows those
who are renting are more likely to display characteristics of
vulnerability and to be in poor health compared with other UK
adults.
The mortgage market is resilient. Over
recent years the FCA has seen improvements in mortgage lenders'
conduct standards and default rates have remained historically
low.
This work to reform mortgage rules was
included in the FCA's new 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 has
talked to firms about the flexibility already available when
checking if someone can afford a mortgage. This has helped more
borrowers access mortgages.
There are many factors at play when
thinking about the future of the mortgage market. 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. They will 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.
Feedback on the discussion paper will
close on 19 September. Before recommending any changes to its
rules, the FCA will focus on how consumers and the market are
protected.
Notes to
editors
-
The FCA's 5 year
strategy published earlier this year, aims to deepen
trust, rebalance risk, support growth and improve lives. As
part of this work, the FCA is reviewing mortgage rules to
consider how to update its mortgage framework to support
consumers in accessing the market.
-
We have already reminded lenders of the flexibility in our stress testing rules. We've
seen several lenders react to this, helping more customers to
access mortgages.
-
In May, we announced that we
are consulting on proposals
for consumers to more easily make
certain changes to their mortgage and engage with their
provider, as well as retire guidance that has since served
its purpose.
-
A copy of a speech on our mortgage
related work given by Emad Aladhal at the Building Societies
Association can be found here.
