The FCA has today set out its plans for reforms to the mortgage market, benefitting first-time buyers, the self employed, and later life borrowers.
The regulator has confirmed that it will focus on four areas:
• First-time buyers and underserved consumers: Simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.
• Later-life lending: Reviewing retirement interest-only requirements to make them more accessible, exploring ways to improve advice to help people confidently plan for later life, and conducting a focused market study to ensure the lifetime mortgage market can meet the changing needs of future customers.
• Innovation and disclosure: Encouraging the use of data and technology, such as AI, to help brokers give better and faster advice while keeping a human touch, and looking at ways to make advertising and disclosure rules simpler, so consumers can understand information online more easily.
• Protecting vulnerable consumers: Working with partners to support people affected by financial abuse and help those using a mortgage to manage or consolidate debt.
The FCA will start to consult the public on proposed rule changes in the four areas from early 2026 and aim to have the first rule changes in place later that year.
The FCA will also launch a focused market study to consider how the later life lending market could develop to meet the different needs of future consumers. The market study will be forward-looking and consider how the FCA can support the market to adapt and innovate, so consumers can access fair value products that meet their needs. Terms of reference will be published in the first quarter of next year.
In March 2025, the FCA reminded firms about flexibility in interest rate stress tests. The industry acted, widening borrowing options and easing affordability pressures, and is able to offer around £30,000 more to many borrowers.
David Geale, executive director for payments and digital finance at the FCA, said: "We have worked at pace this year to improve outcomes for customers wanting a mortgage. 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.
"Reforming the mortgage market can help address the fact that as a society we’re saving too little for later life, yet people have huge wealth tied up in property."
Damien Burke, head of regulatory practice at financial services consultancy Broadstone, commented: “The FCA’s mortgage market review signals a clear shift towards a more risk-sensitive and data-driven approach, moving away from blunt affordability rules towards assessments that better reflect real borrower behaviour and lifetime income patterns. In an age of Open Finance, AI and economic uncertainty, it’s good to see the FCA acknowledge the option of shifting from traditional affordability approaches towards a more nuanced ‘shape of affordability’ and variable payment structures that have already been introduced in the Unsecured Personal Loan market.
“Greater flexibility for first-time buyers, the self-employed and later-life borrowers can widen access without weakening standards, provided lenders continue to anchor decisions in robust credit risk modelling and stress testing. The challenge now will be ensuring innovation and AI-enabled advice enhance risk insight and consumer outcomes, rather than simply increasing complexity or mispricing risk.”
