It’s a valid question given the mood music from the FCA right now. For financial advisers it could be time to re-think pitches on mortgage work as the market stalls and rules are updated, maybe even relaxed, in order to get some new buyers in. There are long term problems in the UK housing market of course and the exodus of BTL investors and Air BnB buyers looks set to continue so long as the current government are in office. Why? Simple communism really, many Labour MPs hate the idea that someone should buy a house and then let it short term to make money. There is a movement within Labour to acquire houses for migrants/HMOs and so BTL is the logical target there.
Japan style lifetime mortgages extending to perhaps 50 years could also be on the cards. Some inter-generational rules regarding liability for mortgage payments in the future might be workable, at least as an option for descendants of the original borrower, rather than repossession. Hard to see that working out in an era of low marriage and high divorce rates.
Moving on however, Reeves and others in Labour need to show some sort of graphs highlighting economic growth next year and the on the run up to the 2029 election. One way to do that is to entice people back into property, especially those in the public sector who just fail the affordability tests due to 50-70K wages being not quite enough to swing a mortgage with zero deposit, plus car lease payments, credit card bills etc. That will fit the narrative of helping “working people” get on the ladder for sure.
For the FCA they have to balance the threat of poor lending decisions to younger people who have very little financial control over their rented lifestyles, an entitled generation basically, with the realpolitik of stimulating growth in a market paralysed by Stamp Duty at the top end and low real world wages at the bottom rungs.
Here’s the word;
First-time buyers, the self-employed and people borrowing into retirement could benefit from further possible changes to mortgage rules.
The FCA is seeking a public conversation on the future of the mortgage market as part of its work to help consumers navigate their financial lives and to support economic growth.
Areas include:
- Potential to update responsible lending rules to support wider access to sustainable home ownership.
- Ensuring the regulatory framework and the market are prepared for the likely future increases in demand for later life lending.
- Introducing more flexibility to promote consumer understanding, information needs, and innovation.
- Rebalancing the collective risk appetite in mortgage lending.
David Geale, Executive Director for Payments and Digital Finance, said:
“We want to evolve our mortgage rules to help more people access sustainable home ownership. Having achieved higher standards in the market, now is the time to consider allowing more flexibility in a trusted market.
“Changing our mortgage rules could make it easier for people to get onto the property ladder and manage mortgages into retirement.
“We can’t solve all the issues related to home ownership. But we’re playing our part in helping people better use the mortgage market to navigate their financial lives and to encourage a dynamic, innovative and competitive market.”
The mortgage market has changed considerably over recent years. First time buyers are older and borrowing for longer, including into later life. The FCA’s data shows that in 2024, 68% of first-time buyers borrowed for terms of 30 years or longer. Homeowners will also increasingly need to access their housing wealth to provide for their needs during retirement.
Home ownership has become an increasingly challenging aspiration for many, with more people renting for longer periods of time. Those that do rent, face higher housing costs and less security. The FCA’s Financial Lives 2024 survey shows those who are renting are more likely to display characteristics of vulnerability and to be in poor health compared with other UK adults.
The mortgage market is resilient. Over recent years the FCA has seen improvements in mortgage lenders’ conduct standards and default rates have remained historically low.
NEW STRATEGY
This work to reform mortgage rules was included in the FCA’s new strategy, which commits the regulator to helping consumers navigate their financial lives and help growth. The measures were also included in a letter to the Prime Minister, which detailed changes to support economic growth.
As part of this work, the FCA has talked to firms about the flexibility already available when checking if someone can afford a mortgage. This has helped more borrowers access mortgages.
There are many factors at play when thinking about the future of the mortgage market. Housing supply, social policy and wider economic conditions all impact affordable home ownership. The FCA highlights that any changes to its rules are only one part of the story. They will work with others to support access to home ownership to create an effective mortgage market where more borrowers who can afford to repay can access the mortgages they need.
Feedback on the discussion paper will close on 19 September. Before recommending any changes to its rules, the FCA will focus on how consumers and the market are protected.
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