First-time buyers and the self-employed could soon find it easier to get a mortgage under new borrowing rules set out by the Financial Conduct Authority (FCA).
The FCA says it will be “simplifying mortgage rules to allow more flexible products” including different repayment patterns, while also acknowledging that work lifestyles are vastly different now from decades ago, which impacts income timing reliability among other areas. That could result in a change to monthly payments as the only default method of paying a mortgage.
Utilising increased amounts of data and using AI to get faster and better decisions about how much people can borrow will also be encouraged, as well as a review of advertising rules to ensure they are simple enough for customers to understand.
It is also expected that there will be changes around interest-only mortgages, which have become more infrequent as an option since the financial crisis.
While repayment mortgages are expected to remain the main option for most, initial consultations show there may be situations where interest-only repayments could “support earlier homeownership”. There may also be a “part and part” product available, whereby interest only repayments are made on one section of the loan, and full repayments on another, or rule changes to allow “low start mortgages” to come into play: where interest only payments changes to full repayments after a set defined period, seen as ideal for those who can show expected salary growth.
There will be a public consultation on the rule changes early next year, with the new rules planned to come into effect from later in 2026.
These are in addition to changes already made, which included relaxing rules around stress tests – the levels at which banks and building societies conduct feasibility investigations into potential clients to repay mortgages if interest rates were to move significantly higher.
David Geale, FCA executive director for payments and digital finance, 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.”
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Who could benefit?
The FCA highlighted four areas, which they hope the proposed changes will offer benefits to, including innovation and disclosure, as a general improvement in the way the industry works.
But the FCA has specifically referenced first-time buyers and other underserved consumers as those they are looking to help.
That can include self-employed people, while some lenders already have products which factor in rental payments as proof of ability to repay. Further ways to record and improve the quality of recording rental payments are being sought, to increase the chances of this factor helping people when seeking mortgages.
Additionally, boosting options for “later-life lending” is on the agenda as both the average age of first-time purchases continues to rise and older people look to plan retirement more effectively. The FCA says it is “exploring ways to improve advice to help people confidently plan for later life” and wants to “ensure the lifetime mortgage market can meet the changing needs of future customers”.
Finally, an emphasis on “protecting vulnerable consumers” will be on the agenda, to ensure lenders can work with people who either have been affected by financial abuse or who are using a mortgage to manage debt.
What does the property industry say?
Mary-Lou Press, president of Propertymark (the National Association of Estate Agents), called the changes “welcome recognition” that change was required. “Greater flexibility for first-time buyers, the self-employed, and those with non-traditional or later-life income has the potential to unlock home ownership for groups who have historically been underserved,” Ms Press said.
“Moves to simplify rules, modernise affordability assessments and responsibly embrace innovation such as rental payment data and AI-driven advice could make a meaningful difference, provided robust consumer protections remain in place. The fact that the vast majority of mortgages remain out of arrears shows the current system is fundamentally sound, but also that there is room to carefully widen access without increasing risk.”
Damien Burke, head of regulatory practice at financial services consultancy Broadstone, added: “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.
“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.”
Halifax has said it expects the property market to remain uncertain into 2026 and is forecasting average price growth of between 1 and 3 per cent over the year.
