Financial regulator urges mortgage lenders to be more flexible
The mortgage market could become more accessible for home buyers under reforms set out by the City Watchdog.
The Financial Conduct Authority (FCA) said it is reviewing its regulatory rules to support home ownership and the UK economy.
The regulator said it will shortly launch a call for evidence on current and alternative approaches to stress testing on mortgage applications and will consult in May on ideas to simplify its rules and benefit mortgage consumers, making it easier to remortgage, discuss options outside of regulated advice and reduce their mortgage term.
In the meantime, the FCA said it is reminding lenders about the flexibility its rules provide.
It said: “As interest rates fall, the current market approach to interest rate stress testing may be unduly restricting access to otherwise affordable mortgages… innovation and digitalisation, including use of AI-enabled tools, will be a key driver for growth and good consumer outcomes.”
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.”
Some mortgage brokers remain cautious about the changes though.
Andrew Montlake, managing director at Coreco, said:
“Moves taken to improve access to home ownership for more people is a step in the right direction, and the FCA is right to remind lenders of the flexibility in its affordability guidance.
“It does seem outdated to still be stress testing against rates at 8% plus and not to be able to take past rental payments as proof of affordability as an example. That said, we still need sensible lending policies, and as the last few years have shown, regulations have worked to ensure that mortgage arrears have stayed low even in tough times, but we must do something to support the homeowners of the future.
“The concern is any mention of making it easier to review options ‘outside a regulated advice process’, and with a high percentage of mortgage loans now being taken out through mortgage brokers, perhaps this is also a big reason why arrears have stayed low. Advice must be front and centre.”
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