First-time buyers, older borrowers and the self-employed could benefit from a more flexible approach to mortgage lending under proposals unveiled by the Financial Conduct Authority.

The regulator has launched a consultation on a package of mortgage rule changes designed to give lenders greater flexibility to assess individual circumstances, while maintaining existing consumer protections.

The proposals are intended to better reflect modern employment patterns and changing demographics, with the FCA looking to remove some of the barriers that can make it harder for certain groups to access mortgage finance.

Among the measures under consultation are changes to help lenders offer more flexible repayment arrangements for borrowers with variable incomes, including the self-employed, and those paid in foreign currencies.

The FCA also wants to encourage firms to assess affordability based on a borrower’s full and current financial position, rather than automatically excluding applicants because of minor or historic credit issues.

Further proposals include updating affordability guidance for retirement interest-only mortgages to help older homeowners access housing wealth, and revising rules around interest-only and part interest-only lending to provide greater flexibility where borrowers have a suitable repayment strategy.

David Geale (pictured), 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.”

The consultation forms part of the regulator’s wider programme of mortgage market reform, announced in December 2025, aimed at ensuring the market better reflects the needs of today’s borrowers.

The FCA said the proposals build on higher standards established across the sector, including through the Consumer Duty, and are intended to rebalance risk without weakening safeguards for consumers.

The regulator is also seeking feedback directly from consumers through an online engagement tool, alongside responses from firms and other stakeholders. The consultation closes on 28 July 2026.

SENSIBLE EVOLUTION

Richard Pinch, head of banking and credit advisory at Broadstone, said: “The FCA’s proposals represent a sensible evolution of the mortgage market, recognising that traditional affordability assessments do not always reflect the realities of modern working patterns, income streams and borrowing needs.

“The regulator is seeking to give lenders greater flexibility through affordability assessments that better reflect real borrower behaviour and lifetime earnings patterns. The proposals could be particularly beneficial for groups that have historically found it more difficult to access mortgage finance, including the self-employed, those with variable income and older borrowers.

“Granting lenders more scope to consider an applicant’s full financial circumstances rather than relying on rigid criteria should help widen access without compromising consumer protection.

“It could also support the use of more sophisticated affordability modelling, powered by advances in data analytics and AI, meaning lenders should already be considering how they can use these tools to better understand and serve customers’ needs.

“Importantly, the FCA is not proposing a return to the looser lending standards seen before the financial crisis.

“Instead, it is seeking to modernise the framework to reflect today’s labour market and demographics, while retaining the strong safeguards that have helped underpin the resilience of the mortgage market.”

POSITIVE AND PRACTICAL DEVELOPMENT

Tony Müdd, third party products & services director at St. James’s Place, said: “The FCA’s proposals are a positive and practical development that should deliver real benefits for clients. By giving lenders more flexibility to assess affordability based on individual circumstances, rather than rigid rules around past credit issues or variable income, many more self-employed clients, first-time buyers, and older homeowners will find it easier to access the mortgage they need.

“The updates to retirement interest-only and interest-only mortgages are particularly welcome. They will help clients unlock housing wealth in later life, supporting retirement income planning and helping meet long-term care costs, while maintaining strong consumer protections.

“Professional advice however will remain essential to navigate these options safely and align them with individual circumstances. This rebalancing should support more clients in achieving their financial goals.”

DELICATE BALANCING ACT

Karen Noye, mortgage specialist at Quilter, said: “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.

“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.

“Wherever possible, anyone looking to get onto the property ladder or considering making changes to their mortgage repayments should seek the support of a professional mortgage adviser wherever possible.

“The mortgage market is constantly evolving, so being able to make decisions that are well informed and appropriate for your long term financial security is key.”