The Financial Conduct Authority (FCA) today announced it is looking into simplifying tough borrowing criteria, which could help struggling first-time buyers finally get on the property ladder
Strict mortgage lending rules that were introduced following the 2008 financial crash could soon be eased to help more people get on the property ladder.
The Financial Conduct Authority (FCA) today announced it is looking into simplifying tough borrowing criteria, which could help struggling first-time buyers finally get on the property ladder. Under current rules, lenders are limited in how many large mortgages they can approve.
There is a cap that means no more than 15% of a lender’s mortgage book can compromise loans for properties costing more than 4.5-times the buyer’s annual salary – but this could soon be changed to allow people to borrow larger sums. This could be useful for people on lower salaries, providing they can afford their repayments.
Another change reportedly being considered, is to affordability rules that test whether borrowers can still keep up with repayments if interest rates unexpectedly rise. Rental payments may also soon be included as part of your borrowing, rather than focusing just on your income, reports The Times.
Rightmove mortgage expert Matt Smith said: “It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like. Regulatory change is what we’ve been calling for, as that is what is needed to truly impact home-mover affordability, particularly for first-time buyers. We’ve seen some innovative products and schemes announced by lenders to try and do their bit to support home-buyers, but they need support from both the government and regulators to really drive more options for people.”
However, Richard Donnell, executive director of research at Zoopla, warned: “The big question is whether current rules go too far but there is a risk for consumers and the government in how far this might go. Finding the balance not easy and is compounded by the huge north-south divide in affordability.”
It comes after the Government asked what steps the FCA could take to help support economic growth. The FCA says low numbers of borrowers are missing mortgage repayments, or having homes repossessed. FCA chief executive Nikhil Rathi said the regulator would: “Begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults.”
The FCA said it will also work to remove “overlapping standards” such as the Mortgage Charter, which was set up in 2023 to help mortgage borrowers who are struggling with their repayments following rising interest rates. However, banks and building societies were already offering various forms of support.
The FCA will also look into whether it should remove the £100 contactless limit, to allow firms and customers greater flexibility. The limit was raised to £20 in 2012, then to £30 in 2015, before going up to £100 in October 2021. The FCA said another step it could take would be to set new digital service standards, for example requiring firms to accept electronic verification of death to speed up bereavement claims in insurance.m
