15th Dec 2025 09:16
(Alliance News) - First-time buyers, self-employed people and older borrowers could find it easier to access mortgage finance under plans from the City regulator to modernise rules to reflect changes in how people live now and in the future.
The Financial Conduct Authority, FCA, said it wants to enable "the mortgage market of the future", with a market that adapts to fast-changing technology, employment and demographic shifts, and people's need and expectations, throughout their lives and into their later years.
The FCA will start to consult on proposed rule changes from early 2026 and aims to have the first rule changes in place later that year.
It is focusing on four areas: first-time buyers and underserved customers; later life lending; innovation and disclosure; and protecting vulnerable customers.
It will also launch a market study to consider how the later life lending market could develop to meet different needs, with terms of reference being published in the first quarter of next year.
Looking ahead, more mortgage holders are set to borrow beyond state pension age and with projections of under‑saving into retirement, access to later life mortgages could be key to helping people achieve their financial goals, the regulator said.
As part of its work, the FCA will look at simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.
It will also explore ways to improve advice to help people plan for later life and ensure the lifetime mortgage market can meet changing needs.
The use of technology such as artificial intelligence will be encouraged, to help brokers give better and faster advice.
The regulator will also look at ways to make advertising and disclosure rules simpler, helping people to understand information online more easily.
The FCA also plans to work with others to support people affected by financial abuse and help those using a mortgage to manage or consolidate debt.
The regulator published feedback to its discussion paper on the future of the mortgage market.
It said there was "wide agreement" that some potential first-time buyer groups could be better served.
The statement said: "This includes those who cannot raise a large deposit, do not have family support, are self‑employed, have irregular or contract‑based income, are recovering from a negative life event, have overseas assets and income, or have dealt with a credit impairment."
The FCA said it had asked if it should update its interest‑only rules to support first-time buyers. Interest-only deals allow people to pay just the interest on the mortgage each month, meaning that a borrower will still need to repay the amount borrowed at the end of the mortgage or when the property is sold.
Since 2013, sales of any kind of interest‑only product to first-time buyers have been less than 0.5% of all sales.
The FCA said those responding had told it that part interest‑only and part repayment mortgages could enable some first-time buyers and other consumers to access homeownership earlier.
Its statement said: "Our framework currently treats part interest‑only in the same way as pure interest‑only.
"We will consider proposing a differentiated affordability approach for certain part interest‑only lending."
Some organisations had also encouraged the regulator to review its requirements and widen what constitutes a credible repayment strategy, including the option to consider later life mortgages.
This could potentially widen mortgage availability to certain customers, including middle‑aged borrowers for whom a full repayment mortgage may no longer be viable, the regulator said.
Some organisations have also pointed to "low start" mortgages as an option to support certain first-time buyers and underserved customers.
These mortgages could start as pure interest‑only and convert to repayment after a set period and are seen as particularly suitable for customers with high expected salary growth. The regulator said it will consider updates to the treatment of potential future increases to income.
The FCA will also look at moves to support industry innovation and adoption of rental payment data in firms' affordability assessments.
Its statement said: "The UK market, alongside the US, is developing some of the most advanced approaches globally to integrating rental payment data to positively build customer credit profiles."
The FCA said it has already seen an impact on mortgage lending since it clarified a mortgage "stress test" rule earlier this year.
In March, the FCA reminded firms about flexibility in interest rate stress tests. Stress tests help to ensure that a mortgage remains affordable for a borrower.
Many lenders have announced changes in response which could enable some people to borrow thousand of pounds more.
The FCA's statement said that "85% of the market has updated its approach, able to offer around GBP30,000 more, supporting many more first‑time buyers in achieving home ownership".
David Geale, executive director for payments & digital finance, said: "We have worked at pace this year to improve outcomes for customers wanting a mortgage.
"We'll use insight from consumers and industry to drive further reforms and rebalance risk – helping to widen access to affordable mortgages to meet the needs of consumers today.
"Reforming the mortgage market can help address the fact that as a society we're saving too little for later life, yet people have huge wealth tied up in property."
Despite rises in interest rates and living costs, 99% of mortgages taken out since 2014, when mortgage standards were tightened, are not in arrears, the regulator said.
By Vicky Shaw, PA Personal Finance Correspondent
Press Association: Finance
source: PA
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