The FCA has set out steps it will take to improve access to mortgages.
The FCA is reminding lenders of flexibility in its rules[1], which can help more people access a mortgage. This forms part of the work, announced in January in a letter to the Prime Minister[2], to review regulation to support home ownership and the UK economy.
When lenders decide whether to approve a mortgage, they test whether a borrower could still afford their mortgage at higher interest rates.
As interest rates fall, the current market approach to interest rate stress testing may be unduly restricting access to otherwise affordable mortgages.
The FCA wants to ensure firms are aware of the flexibility its rules provide, and that creditworthy consumers can access the affordable mortgage they need, supporting home ownership.
To consider further improvements quickly, the FCA will shortly launch a call for evidence on current and alternative approaches to stress testing.
Then in May, the FCA will launch a consultation proposing early ideas to simplify its rules and benefit mortgage consumers, making it easier to:
- remortgage with a new lender
- discuss their options outside a regulated advice process
- reduce their mortgage term
And in June, the FCA will open a public discussion on the future of the mortgage market. Alongside all interested parties, the FCA will consider what the market needs to deliver for different consumers at different stages in their lives and the wider UK economy, and the role of regulation to deliver it.
Nikhil Rathi, Chief Executive of the FCA, said: '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.
'There is more to be done, and we will be delivering further proposals quickly to support home ownership and the wider UK economy.'
Rachel Reeves, Chancellor of the Exchequer, said: 'This is welcome action by the regulator to kickstart 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.'
Notes to editors:
Read our letter to the Economic Secretary to the Treasury[3].
The FCA has outlined plans for further work to support home ownership. This includes:
- Reminding firms of the flexibility provided in our interest rate stress testing rule.
- Later this month, working with experts, including from the mortgage sector, through an Open Finance Sprint to explore how smart data can enhance mortgage products and services.
- In May, the FCA will consult on proposals to make it easier for consumers to remortgage with a new lender, reduce their overall cost of borrowing through term reductions and discuss their options with a firm outside a regulated advice process. It will also consult to retire outdated regulatory guidance, such as its maturing interest-only mortgage guidance.
- In June, the FCA will launch a public discussion on the future of the mortgage market. This will include consideration of risk appetite and responsible risk-taking, alternative affordability testing and product innovation, lending into later life and consumer information needs.