Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

FCA Considers Flexible Mortgage Rules to Support Diverse Borrowers

The Financial Conduct Authority (FCA) is consulting on proposed changes to responsible lending and mortgage rules in the UK. The regulator aims to give lenders more flexibility in how they assess borrowers’ financial circumstances, with a focus on supporting a wider range of customer needs and maintaining healthy competition in the mortgage market.

The FCA’s consultation includes a review of how variable and irregular incomes are treated, reflecting changes in working patterns over the past decade. The regulator is also considering updates to payment options, such as interest-only, part-and-part, and retirement interest-only (RIO) mortgages, to provide more flexibility for borrowers who are keeping their mortgages for longer periods.

Emad Aladhal, the FCA’s director of retail banking, stated that the goal is to allow mortgage lenders to take a more rounded view of applicants’ finances, rather than relying on a standardised approach. This could benefit borrowers who do not fit traditional lending criteria, a group that has often been under-served by mainstream lenders.

The article notes that while the proposed shift towards a proportionate, outcomes-focused, and Consumer Duty-led approach is welcomed by some in the industry, there are concerns that risk-averse firms may be less likely to adopt the new rules. There is also a risk that increased activity by larger lenders could reduce competition if smaller firms are unable to compete or are forced to take on greater risk.

The UK mortgage market remains highly competitive and innovative, but it is still dominated by high street lenders. Recent years have seen some companies leave the market or be acquired by larger providers, which has reduced choice for consumers. The article highlights the importance of ensuring that any regulatory changes continue to support a diverse range of lenders and products, so that good customer outcomes are maintained.

For letting agents and inventory clerks, these potential changes could impact the types of tenants and buyers entering the market, particularly those with non-traditional income or credit backgrounds. The consultation’s outcome may influence the range of mortgage products available and the overall competitiveness of the UK property sector.