In a move aimed at addressing the evolving needs of UK consumers, the Financial Conduct Authority (FCA) is exploring a range of reforms to the mortgage market. The regulator’s review suggests that certain groups, including freelancers, gig economy workers, and those with variable incomes, could soon enjoy greater flexibility in how and when they make their mortgage payments.
The proposed changes are part of the FCA’s efforts to “widen access to affordable borrowing and help more people own their own home.” One key idea under consideration involves offering “alternative payment schedules” to individuals with irregular income flows, potentially allowing them to vary the amount they pay each month or make payments every two months, for example.
The regulator has also acknowledged the frustration some consumers have faced when the monthly payment a lender deems affordable is less than the rent they currently pay, leading to a smaller overall mortgage offer than expected. To address this, the FCA is examining ways to give more recognition to a decent record of paying rent during the affordability assessment process.
Additionally, the FCA is exploring the possibility of making interest-only mortgages more accessible. These products, which were once widely popular but fell out of favour after the 2007-08 financial crisis, could be “suitable for some consumers who may struggle to afford a traditional repayment mortgage.”
Looking ahead, the regulator is also focused on the “later life lending” market, which includes equity release mortgages for older homeowners. As more people take out mortgages that extend beyond their state pension age, the FCA aims to explore ways to boost this growing segment of the market.
Emad Aladhal, the FCA’s retail banking director, emphasised that people’s financial lives and needs are evolving, and that “housing wealth will be more important to financial wellbeing” in a world where pension income is less reliable. By introducing these proposed changes, the regulator hopes to help more UK consumers achieve their homeownership aspirations.
Separately, Nationwide Building Society has reported that UK house prices could rise by as much as 4% next year, although the path to homeownership may become slightly less challenging for some prospective buyers.