The financial regulator is proposing changes that could make it easier for first-time buyers, older borrowers, and self-employed individuals to secure mortgages. The Financial Conduct Authority (FCA) aims to assist lenders in offering more flexible repayment options for those with variable incomes, such as self-employed individuals who lack consistent monthly earnings. This group often faces challenges in obtaining mortgages due to the absence of a regular payslip, making it harder for lenders to assess their financial risk.
Furthermore, the FCA plans to review regulations to encourage lenders to consider applicants’ current financial situations comprehensively, rather than automatically disqualifying individuals with past credit issues. Updates to rules regarding interest-only mortgages are also being explored to provide lenders with greater flexibility while ensuring borrowers have a viable repayment plan, especially for larger loan amounts.
Interest-only mortgages involve paying only the loan interest during the term, with the principal amount due at the end. Historically, these loans have sparked controversy as some borrowers struggled to repay the original loan amount.
Additionally, the proposals include making it simpler for older homeowners to access the equity in their properties by revising affordability criteria for retirement interest-only mortgages. The FCA emphasizes the importance of a personalized approach in evaluating customers’ creditworthiness and is seeking feedback through an online tool until July 28.
David Geale, the FCA’s executive director for payments and digital finance, highlighted the necessity to adapt mortgage rules to evolving demographics and work patterns. By enhancing consumer protections, the FCA aims to broaden access to mortgage financing for underserved individuals who have the capacity to repay.
Sarah Coles, AJ Bell’s head of personal finance, emphasized that a healthy housing market requires not only accessible mortgages but also an adequate supply of affordable properties and fair tax regulations. Building sizeable deposits remains a challenge for many first-time buyers, especially amid soaring rental costs.
