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June 26, 2025
The UK’s financial watchdog has launched a ‘public conversation’ on the future of the mortgage market, aiming to boost homeownership and support growth.
The Financial Conduct Authority (FCA) has published a discussion paper that sets out the potential benefits and risks of rule changes.
The regulator says more flexibility could help lenders tailor products more effectively to diverse customer needs.
Those who could particularly benefit from changes to mortgage rules include:
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.
“Changing our mortgage rules could make it easier for people to get onto the property ladder and manage mortgages into retirement.”
First time buyers are now older and borrowing for longer, including into later life. The FCA’s data shows that in 2024, 68% of first-time buyers borrowed for terms of 30 years or longer. Homeownership has become increasingly difficult for many, with more people renting for longer periods of time
The paper says, ‘Many people’s patterns of employment in the UK are now very different to those of earlier generations. There is more use of short-term contracting, zero-hours contracts and more people are self-employed.’
And the regulator wants to hear feedback on what changes should be implemented to support access to mortgages for people who are self-employed or with volatile income, both when buying a house and in later life.
The FCA is also seeking views on whether the stress test for mortgages should be changed. The mortgage stress test was introduced following the 2008 financial crisis and requires lenders to consider the potential impact of future changes to interest rates to make sure the borrower can afford their mortgage.
But the FCA says that while the stress test has strengths, it is ‘concerned that it may be unduly limiting the amount of borrowing that some otherwise creditworthy customers can access’.
And that as house prices have grown much faster than wages, home ownership has become increasingly difficult for many, especially for those without access to the Bank of Mum and Dad.
Suggestions in its discussion paper include how changes to stress tests could be made.
It’s not the first time this year the FCA has tackled the issue of stress testing. Earlier this year, after calls from government, the regulator reminded lenders of the existing flexibility in its stress-testing rules, highlighting that current policies might be overly restrictive as interest rates began to fall – potentially limiting access to mortgages that would otherwise be affordable.
This led to multiple lenders loosening their mortgage rules allowing people to borrow more when buying a home. For example, in March, Santander relaxed its stress test. The lender said the change means the average customer would be able to borrow up to £35,000 more.
Other suggestions in the paper include:
Paula Higgins, CEO of HomeOwners Alliance, said:
”We welcome the FCA’s decision to seek views on how to make the mortgage market work better for people. We know the challenges people face in getting a mortgage and that it can seem very unfair, especially for those who are paying high rents but told they can’t afford a mortgage.
But it needs to come alongside increasing the housing stock. And any changes must be a balancing act. If allowing more flexibility means more people can buy a house they can afford then that’s positive.
“But the concern is if the rules are loosened too much, it risks people being in a precarious position in the future. Getting a mortgage and buying your home is only part of the story. If you stretch yourself too far and then mortgage rates shoot up – as we’ve seen in recent years – you could face real difficulties.“
What do you think about the possible changes? You can give your feedback on the discussion paper until it closes on 19 September 2025. Or leave your comments below – we’ll be putting in our own response too.
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