The Financial Conduct Authority will take a look at simplifying the rules around getting a mortgage in a bid to help people struggling to get on the property ladder
The financial watchdog is gearing up to take “swift action” on making mortgages more accessible, with plans for a discussion about the future of the mortgage market this summer.
Come May, the Financial Conduct Authority (FCA) will initiate a consultation to float preliminary ideas aimed at streamlining regulations. This could make processes like switching to a new lender for remortgaging or shortening a mortgage term less complicated.
Following that, in June, the FCA will launch a public discussion to explore the trajectory of the mortgage market. The focus will be on what the market should offer consumers at various life stages and its impact on the broader UK economy, as well as how regulation can facilitate these goals.
Additionally, the FCA is set to request input on current and potential alternative methods for stress testing soon. Lenders use stress tests to determine if borrowers can manage their mortgage payments even with higher interest rates. With interest rates on the decline, the existing approach to stress testing might be unnecessarily limiting access to affordable mortgages, according to the regulator.
The FCA is also reminding lenders about the leeway within its current rules, which aims to ensure that creditworthy customers can obtain the affordable mortgages they need, thus promoting home ownership.
Post-2008 financial crisis, mortgage lending regulations were tightened to prevent a relapse into reckless lending practices.
Mortgage regulations are set to be overhauled, with the Financial Conduct Authority (FCA) taking action to make homeownership more accessible. FCA Chief Executive Nikhil Rathi announced: “We are taking swift action to support people in getting the keys to their own home.”
“Firms have the flexibility to help more people become homeowners and we want them to use it.”
The FCA is expected to unveil further plans to stimulate home ownership and boost the UK economy. Chancellor Rachel Reeves welcomed the move, saying: “This is welcome action by the regulator to kick-start economic growth and help working families get on the housing ladder.
“The world is changing. That is why we must go further and faster in delivering on our plan for change, so we can get more money into people’s pockets.”
A recent report by UK Finance, a banking and finance industry trade body, highlighted the challenges faced by first-time buyers. Since stricter mortgage lending rules were introduced in the 2010s, the required deposit amount has increased significantly, particularly in and around London.
