First-time buyers and the self-employed could get a step-up onto the housing ladder, under new plans from the FCA.
Its priorities for reforms to the mortgage market also include helping homeowners unlock housing wealth for a more comfortable later life.
The FCA will focus on 4 areas:
- First-time buyers & underserved consumers: Simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.
- Later-life lending: Reviewing retirement interest-only requirements to make them more accessible. Exploring ways to improve advice to help people confidently plan for later life. Conducting a focused market study to ensure the lifetime mortgage market can meet the changing needs of future customers.
- Innovation & disclosure: Encouraging the use of data and technology, such as AI, to help brokers give better and faster advice while keeping a human touch. Looking at ways to make advertising and disclosure rules simpler, so consumers can understand information online more easily.
- Protecting vulnerable consumers: Working with partners to support people affected by financial abuse and help those using a mortgage to manage or consolidate debt.
David Geale, executive director for payments and digital finance, said:
“We have worked at pace this year to improve outcomes for customers wanting a mortgage. We’ll use insight from consumers and industry to drive further reforms and rebalance risk – helping to widen access to affordable mortgages to meet the needs of consumers today.
“Reforming the mortgage market can help address the fact that as a society we’re saving too little for later life, yet people have huge wealth tied up in property.”
The FCA will start to consult the public on proposed rule changes in the four areas from early 2026 and aim to have the first rule changes in place later that year.
The FCA will also launch a focused market study to consider how the later life lending market could develop to meet the different needs of future consumers. The market study will be forward-looking and consider how the FCA can support the market to adapt and innovate, so consumers can access fair value products that meet their needs. Terms of reference will be published in the first quarter of next year.
In March 2025, the FCA reminded firms about flexibility in interest rate stress tests. The industry acted, widening borrowing options and easing affordability pressures, and is able to offer around £30,000 more to many borrowers.
Despite the rise of interest rates and living costs, 99% of mortgages taken out since 2014, when mortgage standards were tightened, are not in arrears.
Mary-Lou Press, President of NAEA Propertymark (National Association of Estate Agents), said:
“This is a welcome recognition that the mortgage market must better reflect modern working lives and changing borrower needs. Greater flexibility for first-time buyers, the self-employed, and those with non-traditional or later-life income has the potential to unlock home ownership for groups who have historically been underserved.
“Moves to simplify rules, modernise affordability assessments and responsibly embrace innovation such as rental payment data and AI-driven advice could make a meaningful difference, provided robust consumer protections remain in place. The fact that the vast majority of mortgages remain out of arrears shows the current system is fundamentally sound, but also that there is room to carefully widen access without increasing risk.
“As affordability pressures ease and lenders adapt following changes to stress testing, reforms should be introduced in a measured way, alongside clear advice and transparency. Ensuring consumers fully understand their options, particularly around interest-only, part-repayment and later life lending, will be key to supporting sustainable home ownership both now and in the future.”
Damien Burke, Head of Regulatory Practice at leading independent financial services consultancy Broadstone, said:
“The FCA’s mortgage market review signals a clear shift towards a more risk-sensitive and data-driven approach, moving away from blunt affordability rules towards assessments that better reflect real borrower behaviour and lifetime income patterns. In an age of Open Finance, AI and economic uncertainty, it’s good to see the FCA acknowledge the option of shifting from traditional affordability approaches towards a more nuanced ‘shape of affordability’ and variable payment structures that have already been introduced in the Unsecured Personal Loan market.
“Greater flexibility for first-time buyers, the self-employed and later-life borrowers can widen access without weakening standards, provided lenders continue to anchor decisions in robust credit risk modelling and stress testing. The challenge now will be ensuring innovation and AI-enabled advice enhance risk insight and consumer outcomes, rather than simply increasing complexity or mispricing risk.”
Will Hale, CEO of Key Advice & Air:
“Today’s feedback statement from the FCA, following the discussion paper on the future of the mortgage market issued in June, re-emphasises the demographic and economic changes that will create more demand from homeowners to access their housing wealth in later life. It is also positive that the regulator has acknowledged the product innovation that has taken place in the lifetime mortgage market to include options to make full or partial interest payments rather than allow interest to roll‑up, pay down capital with reduced or zero repayment charges and flexible drawdown.
“We welcome the opportunity to engage, along with other industry stakeholders, in the focused market study in 2026 to ensure the sector is set-up to support increased demand recognising that consumers need to fully understand all their options for funding their later life, receive timely and appropriate support and advice, and have access to products that deliver good consumer outcomes and offer fair value.
“However, advisers should not wait for the outcome of this market study and ensure that they seize the opportunity that later life lending offers here and now and position themselves for future growth. Significant customer demand already exists and, alongside the compelling commercial reasons for focussing on this sector, Consumer Duty obligations mean that advisers have a responsibility to ensure customers are aware of all of their options. Our message would be that all mortgage and wealth advisers either need to expand their scope of advice to cover modern lifetime mortgages, and other later life lending products such as RIOs, or to put in place a referral relationship with a trusted specialist and be able to demonstrate that a holistic view of needs and wants has been considered and all options taken into account in any recommendation made.
“The direction of travel of the regulator is clear, utilisation of property wealth needs to be a central part of financial planning throughout all life stages – not considered just as a last resort. So particularly when dealing with older customers, advisers must decide whether you should write or refer but ignore later life lending at your peril.”
Commenting on the FCA’s Mortgage Rule Review roadmap, Mr Burrowes said:
“The FCA’s acknowledgement that housing wealth will play an increasingly important role in later life financial wellbeing is both timely and necessary. For many older homeowners, later life lending is no longer a niche option, but a practical and responsible way to support retirement income, manage debt, or remain in their own homes for longer.”
The FCA’s roadmap highlights demographic change, longer mortgage terms and pension under-saving as structural challenges facing the UK, and signals further work to ensure the later life lending market is ready to meet growing demand.
Mr Burrowes added:
“We strongly welcome the FCA’s commitment to a focused market study on later life lending. This presents an opportunity to ensure the market continues to evolve in a way that delivers good outcomes, fair value and consumer confidence, while supporting innovation and choice.”
The Equity Release Council noted the FCA’s recognition of recent product innovation, including greater flexibility around repayments, drawdown features and protections for borrowers, alongside the continued importance of high-quality advice.
“The success of later life lending depends on trust, understanding and advice that puts people’s long-term needs first. Our standards have helped set a strong foundation. We look forward to working closely with the FCA and industry to build on this as demand grows.”
Mr Burrowes also welcomed the FCA’s intention to explore more holistic approaches to advice, reflecting the increasingly interconnected nature of housing, pensions and later life financial planning:
“Consumers approaching later life deserve advice that looks at the full picture – not just a single product. We support efforts to break down silos and ensure people can access clear, joined-up guidance when making some of the most important financial decisions of their lives.”
The Equity Release Council said it will actively engage with the FCA’s forthcoming market study and consultations, and continue to represent the interests of consumers, advisers and providers across the later life lending sector.
“Later life lending has a vital role to play in improving financial resilience in later years. This roadmap shows the regulator understands that reality, and we stand ready to help shape the next phase of responsible market development.”
Ben Hampton, Chief Executive of Advice at Royal London comments:
“It is inevitable that an increasing number of people will need to utilise housing wealth as part of their retirement plans, so it makes sense to start considering how the market needs to evolve to meet that need in future.
“Importantly, the FCA has recognised that this is much wider than just product innovation, and there is a need to increase the availability and accessibility of advice to help people navigate their options.”
