The FCA's recent comments on the mortgage market will have resonated with many advisers. By signalling a willingness to loosen certain rules around affordability and repayment structures, the regulator has recognised something advisers have been grappling with for years: the way people earn a living has changed, but mortgage lending has often struggled to keep up.
The current system can feel unforgiving for growing sections of would-be borrowers, particularly those with variable or irregular incomes. Advisers will have had clients who are contractors, freelancers and the self-employed, and who may have strong earnings over the course of a year, yet still find themselves penalised because those earnings don’t arrive in neat, predictable monthly chunks. Others may be held back by historic credit issues that no longer reflect their financial reality, or by affordability models that belong in the past.
From that perspective, the FCA is right to ask whether some groups of borrowers “could be better served”. If home ownership is to remain achievable, the market has to reflect how people actually live and work today, rather than how they did a generation ago.
And advisers will have a central role in helping these underserved borrowing communities access the housing market.
Flexibility reflects modern working lives
The ideas being explored by the regulator, such as greater payment flexibility for those with fluctuating incomes, more recognition of rental payment histories, or a re-examination of interest-only lending for suitable borrowers, all point towards a more nuanced approach.
We don’t need to throw caution to the wind, and repeat the errors of the past, but it is essential to acknowledge that a one-size-fits-all approach to mortgage lending does not work in a labour market where income patterns are increasingly diverse.
For many borrowers, particularly first-time buyers, these changes would represent a tangible improvement. They could be the difference between remaining stuck on the sidelines and finally getting a foot on the property ladder, which is something the industry should welcome.
However, flexibility also brings complexity and it is here that the role of the mortgage adviser becomes even more critical.
Why advice matters more, not less
The vast majority of mortgages in the UK already go through intermediaries, and that is no accident. Borrowers understand that taking on a mortgage is one of the biggest financial commitments they will ever make, and they want reassurance that they are making the right decision.
As lending criteria become more flexible and product structures more varied, that need for guidance only increases. Mortgages built around irregular income streams, alternative payment schedules or interest-only terms require careful consideration - they can be the right solution for some clients, but entirely the wrong one for others.
A good adviser helps clients navigate those choices, taking the time to understand a client’s full circumstances - not just their income today, but their resilience to change, their future plans and their tolerance for risk.
Crucially, advisers also have access to a much broader range of lenders and products than borrowers going direct. That breadth of choice, combined with independent advice, leads to better outcomes.
Guardrails instead of barriers
There is always a sensitivity around loosening mortgage rules, and rightly so, given the scars of the financial crisis are still fresh. Nobody wants to see a return to irresponsible lending.
But there is an important distinction to be made between removing unnecessary barriers and removing safeguards altogether. Properly advised borrowing is a powerful safeguard in its own right, and as an industry we must be championing that argument.
When advisers are closely involved, decisions tend to be more robust. Risks are discussed openly, contingency plans are properly considered, and so clients are less likely to overstretch themselves or take on commitments they do not fully understand.
The best advisers act as a stabilising force within the market, and as lending becomes more complex, the role of the adviser becomes more valuable for borrowers, lenders and regulators alike.
Making reform work
The FCA’s review is a positive step. There are clearly borrowers who could be better served by a more flexible approach, and improving access to mortgage finance should help support a more active and fluid housing market.
The success of any changes will not be judged solely by how many additional mortgages are approved, but whether those borrowers are able to sustain home ownership over the long term, and that outcome depends heavily on advice.
Looser rules can open doors, but it is advisers who help ensure that borrowers walk through the right ones.
