The Financial Conduct Authority (FCA) is exploring further reforms to mortgage regulation as it seeks to widen access to home ownership and ensure the market keeps pace with demographic shifts, economic realities and evolving consumer needs.

In a discussion paper published this week, the regulator confirmed it is seeking input from the public and industry on a series of potential changes to mortgage rules, designed to support first-time buyers, the self-employed and those borrowing into retirement.

The review forms part of the FCA’s broader five-year strategy to help consumers navigate financial decisions and support sustainable economic growth.

David Geale, executive director for payments and digital finance, said: “We want to evolve our mortgage rules to help more people access sustainable home ownership.

 “Having achieved higher standards in the market, now is the time to consider allowing more flexibility in a trusted market.”

The FCA is examining several key areas for potential reform. These include updating responsible lending rules to facilitate broader access, enhancing the framework for later life lending, and introducing greater flexibility to support innovation and consumer understanding.

The discussion also touches on the need to reassess the collective risk appetite that underpins mortgage lending.

Geale added: “Changing our mortgage rules could make it easier for people to get onto the property ladder and manage mortgages into retirement. We can’t solve all the issues related to home ownership.

“But we’re playing our part in helping people better use the mortgage market to navigate their financial lives and to encourage a dynamic, innovative and competitive market.”

The move comes against a backdrop of profound change in the mortgage and housing markets. The FCA notes that in 2024, 68% of first-time buyers borrowed on terms of 30 years or more, with many also borrowing into retirement.

RENTERS’ FINANCIAL VULNERABILITY

Meanwhile, the regulator’s Financial Lives 2024 survey highlights increased financial vulnerability among renters, who often face higher costs and less security than homeowners.

The FCA has acknowledged that while home ownership remains a core aspiration for many, it is becoming increasingly elusive due to rising property prices, constrained housing supply and wider economic pressures.

“it’s good to see that the FCA are aware of how the demographics are changing and ensuring they try to get ahead of where the market will be in the future”

However, the regulator also stressed that its role is limited to the financial framework, and that a range of external factors — including housing policy and economic conditions — must also be addressed to tackle the broader challenges.

Martin Stewart, from the mortgage broker London Money, welcomed the FCA’s forward-looking stance: “I think it’s good to see that the FCA are aware of how the demographics are changing and ensuring they try to get ahead of where the market will be in the future.

“It has been clear to me for quite some time that people are needing to borrow more money, for longer and well into what was considered retirement age. Everything we thought we knew about traditional lending needs to be revisited and updated to accommodate these facts if we want the mortgage market to expand and flourish in the future.”

The regulator has already reminded lenders of the flexibility available under existing rules, including those related to affordability assessments. Several lenders have reportedly responded by broadening access for borrowers. In May, the FCA also began consulting on new proposals to allow borrowers to make simpler changes to their mortgage and to retire legacy guidance that is no longer fit for purpose.

Despite low default rates and improved conduct standards across the market, the FCA emphasised that the current environment requires a more nuanced and adaptable regulatory approach. The discussion paper outlines the need for a mortgage framework that continues to protect consumers, while also enabling innovation and broader inclusion.

The consultation closes on 19 September. Any eventual changes will be subject to further analysis and regulatory scrutiny to ensure they uphold the FCA’s consumer protection mandate.