The Financial Conduct Authority has set out a sweeping vision for a more accessible and sustainable mortgage market, with chief executive Nikhil Rathi warning that structural reform and cross-industry collaboration will be needed to meet the challenges of the next decade.
Speaking at the L&G Mortgage Club’s 30th Anniversary Conference, Rathi said the regulator’s ongoing Mortgage Rule Review aims to “enable the mortgage market of the future” rather than simply fine-tune existing rules. He argued that while the market today appears healthy — with more than 7,000 products available, robust approval volumes, and arrears at historically low levels — it must adapt to fundamental shifts in technology, employment and demographics.
ADDRESSING EXCLUSION AND AFFORDABILITY
Central to Rathi’s message was a call to tackle exclusion among groups who struggle to access mortgage finance. He pointed to self-employed borrowers, those with irregular income or modest deposits, and individuals recovering from adverse credit as examples of people the system “needs to serve better”.
Feedback to the FCA’s discussion paper showed these groups are growing, and without change, many will rent for longer. Rathi cited projections that the proportion of people renting in retirement could more than double by 2041 — leaving them needing around £400,000 more in savings than homeowners to achieve the same standard of living.
The regulator, he said, would consider whether long-standing rules should evolve to allow more flexible lending models, including part interest-only or “low-start” mortgages for borrowers with strong future prospects. He also floated the possibility of using pension savings to fund home purchases, or even a “Citizen’s Advance” against future state pension entitlement, though he acknowledged that each idea carried risks and would require careful debate.
IMPACT OF EARLIER REFORMS
Rathi defended recent changes to affordability testing and loan-to-income limits, which he said had opened the door to thousands more first-time buyers without fuelling house price inflation.
He highlighted that lenders representing 85% of the market have now adopted alternative affordability models since March, allowing borrowers to access around £30,000 more on average. Combined with the Financial Policy Committee’s updated stance on high loan-to-income lending, the changes could support an additional 36,000 first-time buyers each year, according to FCA estimates.
Savills, he added, expects first-time buyer transactions to rise by up to 24% over the next five years.
While some have warned of excessive credit growth, Rathi insisted that the new approaches simply enable “more realistic, robust affordability assessments” and said there was no evidence of overheating in the housing market.
ENCOURAGING INNOVATION AND DATA USE
Rathi also emphasised the role of innovation and technology in expanding access to homeownership. He praised moves such as Experian’s inclusion of rental payment data in credit scoring, and noted that fintech lenders using real-time account data have already boosted approval rates for self-employed applicants by 20%.
The FCA will continue to support the sector’s digital transformation through initiatives such as its AI sandbox and a new three-month “Mortgage TechSprint” beginning next week. OpenFinance and artificial intelligence, Rathi said, would “transform the mortgage market” by improving underwriting and affordability analysis.
LATER LIFE LENDING AND RETIREMENT PLANNING
Turning to the growing importance of later life lending, Rathi said the industry must help older homeowners unlock housing wealth as part of their wider financial planning.
He noted that 43% of people are projected to under-save for retirement, even assuming high rates of homeownership, and warned that the current fragmentation of mortgage and financial advice risks leaving consumers without a clear view of their options.
The FCA is considering whether all mortgage advisers should be able to advise on lifetime products, whether a national referral system could work, or whether something “more radical” is needed to integrate housing wealth into retirement planning.
While legacy mistrust still surrounds equity release, Rathi said modern lifetime products were already helping some consumers, and called for the industry to continue improving standards of advice and communication.
CALL FOR SYSTEM-WIDE REFORM
Rathi stressed that regulation alone cannot deliver lasting change, urging lenders, brokers and government to “move together” to modernise the homebuying process.
He welcomed government proposals to simplify and digitalise property transactions, and said the FCA’s upcoming role as the single anti-money laundering supervisor for the professional services sector could help streamline identity and due diligence checks.
Citing a recent Santander report showing that more than 500,000 transactions fall through each year — at a cost of £1.5 billion to the economy — he said digitisation could bring “significant productivity gains” and personal savings for consumers.
Rathi also signalled that the FCA believes the temporary Mortgage Charter, introduced during the rate shock of 2023–24, “can now be safely retired” to remove overlapping standards and reporting.
IMPLICATIONS FOR THE MARKET
The speech signals a period of potential structural change for lenders and brokers. While Rathi’s comments suggest no immediate tightening of regulation, the FCA’s focus on affordability reform, innovation, and later-life lending may shape product development and advice standards over the next few years.
Moves to integrate mortgage, pension and wealth advice could open the door for new hybrid business models, while the emphasis on Open Finance and AI is likely to accelerate digital transformation.
However, the suggestion of more flexible lending models — such as partial interest-only products — could reignite debate over responsible lending and risk management, particularly if affordability pressures persist.
