The Financial Conduct Authority (FCA) has outlined measures to improve access to mortgages, reminding lenders of the flexibility in its rules that could help more people secure home loans.
This initiative is part of the regulator’s broader effort, announced in January in a letter to the Prime Minister, to review regulations supporting home ownership and the UK economy.
One key area the FCA is addressing is interest rate stress testing. When assessing mortgage applications, lenders test whether borrowers could still afford their loans at higher interest rates. However, with interest rates now falling, the current approach to stress testing may be unnecessarily limiting access to otherwise affordable mortgages. The FCA is urging lenders to make full use of the flexibility within its rules to ensure creditworthy consumers can obtain the mortgages they need.
To explore further improvements, the FCA will launch a call for evidence in the coming weeks on current and alternative approaches to stress testing. In May, it will follow this with a consultation proposing early ideas to simplify mortgage rules, making it easier for consumers to:
- Remortgage with a new lender
- Discuss options outside a regulated advice process
- Reduce their mortgage term
In June, the FCA will open a public discussion on the future of the mortgage market. This initiative will consider what the market needs to provide for consumers at different stages of their lives and the wider UK economy, as well as the role regulation should play in delivering those outcomes.
Nikhil Rathi, chief executive of the FCA, said: “We are taking swift action to support people in getting the keys to their own home.
“Firms have the flexibility to help more people become homeowners and we want them to use it.
“There is more to be done, and we will be delivering further proposals quickly to support home ownership and the wider UK economy.”
Rachel Reeves, Chancellor of the Exchequer, welcomed the initiative, stating: “This is welcome action by the regulator to kickstart economic growth and help working families get on the housing ladder.
“The world is changing. That is why we must go further and faster in delivering on our Plan for Change, so we can get more money into people’s pockets.”
Tony Hall, head of business development at Saffron for Intermediaries, said: “The FCA’s encouragement of greater flexibility in mortgage stress testing is a welcome step toward in improving access to lending, particularly as interest rates ease. However, while the adjustments may help creditworthy borrowers secure financing, it’s essential that lenders apply these flexibilities responsibly to avoid overleveraging and financial strain.
“Crucially, access to high quality mortgage advice must remain central to any solution. Mortgage brokers play a vital role in helping borrowers make informed decisions as lending criteria evolve. Regulation should not prevent people who can afford a loan from getting the loan size they need, but any changes must be carefully considered to avoid higher default rates, especially if borrowers are navigating options without an adviser’s support.”
