The UK's financial watchdog has laid out a blueprint for the most significant overhaul of mortgage rules in over a decade, promising to unlock home ownership for millions currently struggling to secure finance.
Who Stands to Benefit from the Proposed Reforms?
The Financial Conduct Authority (FCA) announced its intention to modernise the mortgage market, stating that existing regulations no longer reflect modern working lives and borrowing needs. The regulator explicitly aims to assist groups that have been historically underserved.
This includes first-time buyers who cannot save a large deposit, self-employed workers, people with fluctuating incomes, and older borrowers needing finance beyond retirement age. The FCA noted there is "wide agreement" that these groups are not well served under current rules.
The comprehensive review will focus on four key pillars: supporting first-time buyers and underserved customers, later-life lending, fostering innovation, and strengthening protections for vulnerable borrowers.
Key Changes on the Horizon for Borrowers
The regulator plans to begin a formal consultation on potential rule changes from early 2026, with the first reforms anticipated later that same year. A major component will be a dedicated market study into later-life lending, with its terms of reference due in Q1 of 2025.
One significant proposal involves a review of interest-only mortgages for first-time buyers. Since 2013, these products have made up less than 0.5% of sales to new entrants. The FCA will consider a new affordability approach for "part interest-only, part repayment" deals, which feedback suggests could help people buy sooner.
The regulator is also examining so-called 'low start' mortgages that begin as interest-only before switching to repayment. These could suit borrowers with strong expected income growth. Furthermore, the FCA will look at expanding what counts as a credible repayment strategy, potentially allowing future later-life mortgages to be considered, aiding some middle-aged borrowers.
Embracing Technology and Modern Data
Innovation is a central theme of the proposals. The FCA will encourage the use of technology, including artificial intelligence (AI), to help brokers deliver faster, more effective advice. It also praised the UK market for developing "some of the most advanced approaches globally" in using rental payment data to build credit profiles for prospective buyers.
Advertising and disclosure rules will be reviewed to make mortgage information clearer, especially online. The FCA also committed to working with other bodies to support victims of financial abuse and those using mortgages to manage debt.
The plans follow a recent successful intervention where clarification on stress-testing rules led 85% of lenders to adjust their approaches. This change has already enabled them to offer around £30,000 more to borrowers, assisting more first-time buyers.
David Geale, the FCA's Executive Director for Payments and Digital Finance, said: "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."
Industry experts have welcomed the move. Aneisha Beveridge of Hamptons noted that while first-time buyers are getting on the ladder, they are doing so later in life. Zara Bray from Quilter Financial Planning warned that demand for later-life lending will "grow sharply" as more retire with mortgage debt.
Mary-Lou Press of NAEA Propertymark added that greater flexibility has the "potential to unlock home ownership for groups who have historically been underserved," provided strong consumer protections remain.
