The Financial Conduct Authority has set out plans to reshape the mortgage market, with a focus on first-time buyers, later-life borrowers and groups it says are currently underserved.

The regulator said its priorities are designed to help more people onto the housing ladder, support homeowners looking to unlock property wealth in later life and ensure the market evolves in line with changing consumer needs.

Under its proposed programme of work (FS25/6), the FCA will concentrate on four areas, including simplifying mortgage rules to allow greater flexibility for borrowers with different income patterns, such as the self-employed.

It said this could enable products that better reflect how earnings change over the course of working life.

LATER LIFE LENDING

Later-life lending will also be a key focus, with the regulator planning to review requirements for retirement interest-only mortgages to make them more accessible.

It will also explore how advice can be improved so borrowers can plan more confidently for later life, alongside a dedicated market study into the future of lifetime mortgages.

Innovation and disclosure form another strand of the work, with the FCA encouraging the use of data and technology, including AI, to help brokers deliver quicker and better advice while retaining appropriate human oversight.

It will also consider whether advertising and disclosure rules can be simplified to make information easier for consumers to understand online.

The final area centres on protecting vulnerable consumers, including those affected by financial abuse or using mortgages to manage or consolidate debt, where the regulator said it would continue working with partners across the sector.

David Geale, executive director for payments and 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.”

TIMETABLE FOR CHANGE

The FCA said it will begin consulting on proposed rule changes across the four areas from early 2026, with the first reforms expected to come into force later that year.

Alongside this, it will launch a focused market study into later-life lending, examining how the sector could develop to meet the needs of future consumers. The study will be forward-looking and assess how the regulator can support innovation while ensuring fair value products.

Terms of reference are due to be published in the first quarter of next year.

The regulator pointed to recent evidence of flexibility in action. In March 2025, it reminded firms about existing headroom in interest rate stress tests. The industry response widened borrowing options and eased affordability pressures, enabling many borrowers to access around £30,000 more.

Despite higher interest rates and rising living costs, the FCA said mortgage performance has remained strong, with 99% of mortgages taken out since 2014 not in arrears.

Seb Murphy, group director at JLM Mortgage Services, said: “FS25/6 has some clear positives for advisers. The FCA is right to step back from enhanced advice and to say it supports holistic advice. A two-tier system would have caused real confusion and risked pushing clients down the wrong path. That decision matters.

“There are also real opportunities here. A fresh look at later life lending, RIO affordability, interest-only options and how irregular income is treated could help more clients borrow in a sensible way. But none of this makes advice less important. It makes it more important.

“My concern is not what the FCA says it wants, but how this could play out in practice. Giving lenders more freedom on product design, disclosure and customer journeys must not lead to advice being treated as optional, or something to add later if problems appear. Talk of ‘tolerable harm’ and rebalancing risk needs to stay rooted in real outcomes for real people.

“If access is widened, advice standards must hold firm. Faster journeys and more choice are fine, but they need clear signposting to advice and strong checks for complex cases. Otherwise we risk repeating old mistakes, just in a more digital form.”