The Financial Conduct Authority (FCA) will explore how to help lenders offer flexible repayments for people with variable incomes, like those who are self-employed
First-time buyers, older borrowers and the self-employed could find it easier to get a mortgage under new proposals set out by the financial regulator.
The Financial Conduct Authority (FCA) will explore how to help lenders offer flexible repayments for people with variable incomes, like those who work for themselves. It can be harder for people who are self-employed to get a mortgage because they typically do not have a single, guaranteed monthly payslip. This can make it more difficult for lenders to assess risk.
The FCA will also consider rule changes to encourage lenders to look at people’s current and full situation – instead of automatically excluding those with past credit issues.
It will also look into updating rules on interest-only mortgages to give lenders more flexibility, while ensuring people have a plan to repay their loan, unless they’re borrowing a smaller amount.
With interest-only mortgages, borrowers only need to pay the interest on the loan during the term of the deal, with the original amount borrowed eventually repaid at the end. In the past, interest-only loans have been controversial due to some people not having the means to pay the original mortgage loan back.
The proposals will also look into making it easier for older homeowners to unlock wealth built up in their property by updating affordability guidance for retirement interest-only mortgages.
The FCA said it wants to encourage lenders to take a more individualised approach when assessing the creditworthiness of customers. The regulator is using an online tool to hear directly from people about their experiences of the mortgage market. Its consultation ends on July 28.
David Geale, executive director for payments and digital finance at the FCA, said: “We’re living longer and how many people work has changed. Our mortgage rules need to keep pace so those who can afford to repay can borrow. Stronger protections mean we can now safely widen access to mortgage borrowing for those that may be underserved.”
Sarah Coles, head of personal finance at AJ Bell, said: “Mortgages are just one part of the picture. A healthy housing market also needs enough affordable properties, plus tax rules that don’t distort buyer behaviour and put people off.
“The flow of first-time buyers also depends on people being able to build healthy deposits. This can be a huge challenge when they’re also having to cover the cost of sky-high rents.”
