Lenders could use greater flexibility in affordability assessments to develop mortgages for customers whose circumstances do not fit traditional lending models, according to financial services consultancy Capco.
Steve Bull, managing principal at Capco, said firms would need clarity over the Financial Conduct Authority’s final rules following the closure of its Mortgage Rule Review consultation.
He said: “As the FCA’s Mortgage Rule Review consultation closes, the onus will now be on clarifying the final rules so lenders can start translating these proposals into products that make a real difference for customers.”
Bull said the proposals could help lenders account for the circumstances of first-time buyers with multiple income streams, self-employed customers and people borrowing later in life.
He said: “The consultation recognises an important point: today’s borrowers don’t always fit traditional lending models. Whether it’s first-time buyers with multiple income streams, self-employed customers or those borrowing later in life, lenders need greater flexibility to better reflect the way people earn, borrow and manage their finances.
“This presents an opportunity to align lending more closely with modern lifestyles and income patterns, while continuing to uphold responsible lending standards.”
He said lenders already had access to the data, technology and analytics needed to form a fuller picture of customers’ financial circumstances. However, firms would have to change their affordability models, decision-making capabilities and product frameworks to use any additional flexibility consistently.
Bull said: “Greater flexibility around affordability assessments has the potential to widen customer choice and support a broader range of products. The data, technology and analytics already exist to make this possible, giving lenders the ability to build a more complete picture of a customer’s financial circumstances and make more informed lending decisions.
“However, flexibility on its own isn’t enough. Firms will need to adapt their affordability models, decisioning capabilities and product frameworks so they can apply that flexibility consistently and with confidence.”
He added: “Ultimately, the success of the Mortgage Rule Review won’t be judged by the rule changes themselves, but by whether consumers have access to mortgage products that genuinely meet their needs without adding unnecessary complexity or risk to the market.”
