Lenders could be given more flexibility to consider individual circumstances and develop products that suit people’s needs if new proposals from the Financial Conduct Authority (FCA) are implemented.
Under the changes, lenders will be able to offer flexible repayments to borrowers with “variable income”, such as the self-employed.
Lenders will also be encouraged to assess a potential borrower’s affordability based on their “complete and current” situation rather than ruling them out if they have minor or historical credit issues.
Retirement interest-only mortgages will be upgraded so that older homeowners can more easily unlock the wealth accumulated in their properties.
The FCA will also revamp the rules around interest-only mortgages to give lenders more flexibility.
David Gill, executive director of payments and digital finance at the FCA, said: “We are living longer and the number of people working has changed. Our mortgage rules need to keep pace so that those who can afford to repay can borrow.
“Stronger protections mean we can now safely expand access to mortgage loans for those who may be underserved.”
According to Sarah Coles, head of personal finance at AJ Bell, the FCA was “further easing” restrictions applied to the mortgage market in the wake of the financial crisis.
“Developing products that fit people’s lives better makes perfect sense,” she said. “Self-employed people on low incomes have been forced to distort their finances to pay the same amounts every month under the current rules.
“Change may allow them to access products that are flexible enough to fit their lives and needs instead.
“A more holistic approach to borrowers will also avoid the current situation where someone who has met all of their financial responsibilities for years could be turned away because of a small mistake they made years ago, when their life looked very different.”
Experts say that relaxing the rules will need to be handled carefully by both professionals and borrowers themselves.
“There will of course be a delicate balance when it comes to expanding access,” said Karen Noy, mortgage expert at Quilter. “More flexible rules around affordability and lending structures, particularly around interest-only offers or borrowing later in life, may help improve access in the short term, but it will be important that borrowers do not take on unsustainable commitments that could impact them further in the future.”
“Wherever possible, anyone looking to move up the property ladder or considering making changes to their mortgage repayments should seek the support of a professional mortgage adviser wherever possible,” she added.
