The Financial Conduct Authority (FCA) announced plans to ease British mortgage lending rules, aiming to help more people buy homes. The regulator is preparing to review and potentially relax stress-testing requirements that assess borrowers’ ability to handle higher interest rates. Additionally, the FCA will launch a public debate in June on the mortgage market, focusing on risk appetite, affordability testing, product innovation, lending to older borrowers, and consumer information needs. A consultation in May will explore ways to simplify remortgaging, improve advice, and reduce loan terms.
These proposals align with Prime Minister Keir Starmer’s push for pro-growth measures and were welcomed by Chancellor Rachel Reeves, who believes they will boost economic growth and help families access homeownership. FCA CEO Nikhil Rathi emphasized swift action to support homebuyers while urging lenders to use existing stress-testing flexibility responsibly.
However, concerns remain that loosening post-2008 financial crisis rules could increase risks, potentially leading to higher defaults, repossessions, and taxpayer-funded bank bailouts. Bank of England Governor Andrew Bailey cautioned that reforms must consider past lessons to avoid future economic shocks. Rathi also warned that easing regulations could harm consumers, calling for clarity on acceptable risk levels.
The FCA plans to retire outdated guidance, such as its interest-only mortgage rules, which overlap with new consumer duty requirements ensuring fair treatment of customers. Rathi assured that consumer protection and responsible lending will remain central to any rule changes, noting improved conduct and firm culture in the financial sector.
