The FCA is consulting on further changes to mortgage lending rules, this time with the aim of helping greater numbers of creditworthy consumers access suitable mortgages.
The regulator wants to increase the scope for firms to offer mortgages with different features and therefore different risks. The key proposals are:
- Amending the interest-only framework:
- Removing the requirement for the borrower to have a credible repayment strategy where the interest-only part of the mortgage is less than 25% of the valuation the lender receives as part of the application;
- Where evidence is not reasonably available to evidence a credible repayment strategy, allowing lenders to make a reasonable assessment as to whether the borrower has a clear understood strategy;
- Introducing thresholds over which the review obligation is triggered; and
- Adding the use of a follow-on mortgage product and conversion to repayment within a reasonable period as examples of credible repayment strategies;
- Removing certain guidance around affordability assessments for joint applications for retirement interest-only mortgages;
- Expanding guidance on payment schedules to include examples of evidence for assessing affordability for customers with variable or irregular income;
- Clarifying that that lenders may agree payment schedules at a frequency other than monthly;
- Clarifying the definition of ‘credit impaired customer’ so that it is not interpreted beyond its purpose as a factual indicator of unaffordability or in any other such a way that denies now-recovered consumers access to mainstream lending;
- Differentiating standards and protections for loan denominated in a foreign currency (i.e. where the denomination is not the same as the borrower’s income) from those where all or part of the income is in a currency other than sterling; and
- Amending the definition of bridging loans which are regulated mortgage contracts to include terms of up to 24 months.
The consultation closes on 28 July 2026.
The consultation is published alongside quarterly mortgage lending data from the regulators, and research from the FCA on mortgage arrears risk for first-time buyers.