This overhaul is particularly timely, as recent data shows a significant increase in borrowing by first-time buyers. The FCA’s reform package aims to meet the evolving needs of diverse consumers, including those with fluctuating incomes and unconventional working patterns. But while the changes promise greater access to mortgages, they may also carry inherent risks for some, such as increased financial strain for vulnerable borrowers.
Mortgage Reform: A Step Towards Greater Flexibility for First-Time Buyers
According to the FCA, the proposed changes aim to provide more flexibility in mortgage products, catering to a wide range of income levels and life stages. The reforms would allow lenders to offer products that reflect diverse working patterns, including part-time or self-employed jobs, which have traditionally been seen as riskier for mortgage providers.
The regulator’s strategy focuses on “rebalancing risk” within the market to ensure that innovation isn’t stifled. While it is crucial to manage risk, the FCA argues that overly stringent regulations could hinder the growth of the market and, by extension, the competition that benefits consumers. The changes are expected to make it easier for first-time buyers, in particular, to access finance by providing more adaptable loan terms.
Recent figures show that borrowing by first-time buyers has risen substantially, with mortgage lenders providing £82.8 billion to 390,000 new buyers in the year to September 2025, an increase of 30% from the previous year. The FCA’s approach seeks to build on this momentum, enabling more individuals to step onto the property ladder despite a challenging financial landscape marked by rising living costs and high interest rates.
Later-Life Lending and Consumer Protection: A Dual Focus for Reform
While the primary focus is on first-time buyers, the FCA’s reforms also extend to the later-life lending market. In response to an aging population and the growing need for retirement planning, the regulator will review retirement interest-only (RIO) mortgages and other lending options for older consumers.
David Geale, executive director for payments and digital finance at the FCA, highlighted that these changes are intended to address a “society-wide” issue: many people are saving too little for retirement, yet a significant portion of their wealth is tied up in property. By reviewing lending products targeted at older borrowers, the FCA hopes to help consumers tap into this wealth to secure a more financially stable retirement.
At the same time, the FCA is committed to protecting vulnerable consumers, particularly those facing financial abuse or struggling with debt. The regulator’s reforms will include measures to improve transparency in mortgage advertisements and ensure clearer communication with borrowers. Additionally, the use of technology, including AI, will be leveraged to improve advice and decision-making processes for both borrowers and lenders, ensuring that consumers are better informed throughout the mortgage journey.
The proposed changes to the mortgage market represent a major shift in the UK’s regulatory landscape. By rethinking how risks are assessed and introducing more flexible mortgage options, the FCA aims to support greater financial inclusion and help aspiring homeowners navigate the often complex housing market. While these reforms may open doors for many, they also come with the responsibility to balance innovation with adequate consumer protection.
