After rules were tightened following the 2008 financial crisis, the Financial Conduct Authority is considering easing them to potentially make borrowing easier.
In a newly published letter, the Financial Conduct Authority (FCA) has said it is looking to simplify mortgage rules that were brought in back in 2008 following the financial crisis. This means it could soon allow banks and building societies more flexibility and opportunity for ‘responsible risk-taking’, particularly when it comes to mortgage lending – specifically for first-time buyers.
The suggestions, which were laid out in the FCA’s letter to Prime Minister Keir Starmer on 16 January, form part of its aim to help boost the UK’s economic growth. After stating that, ‘Growth will be a cornerstone of our strategy through to 2030,’ Nikhil Rathi, the FCA’s chief executive, went on to list the ways in which this could be done, one of which involved relaxing mortgage rules.
‘[We will] 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 default,’ he wrote.
What does this mean for borrowers?
The suggestions, which have been welcomed by lenders, would certainly be a boost for first-time buyers.
‘Reviewing the mortgage lending rules would help with affordability issues, not just for first-time buyers, but also those looking to move further up the housing ladder,’ says Charles Roe, director of mortgages at banking and finance industry body, UK Finance. ‘Banks will always lend responsibly, but the current rules restrict the number of people who can get a mortgage and so could be relaxed.
Matt Smith, a mortgage expert at Rightmove, agrees. ‘It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like,’ he says. ‘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 homebuyers, but they need support from both the government and regulators to really drive more options for people.’
This means the proposals could be a potentially positive first step for those looking to get on the property ladder in 2025. A spokesperson for Zoopla said that finding the balance between current rules and future risk would not be easy. We will keep you informed of any developments.