The Financial Conduct Authority (FCA) has detailed steps to make mortgages more accessible.
The FCA has reminded lenders of the flexibility within its rules, which could help more people secure a mortgage, as part of efforts to support home ownership and the UK economy.
Currently, lenders assess whether borrowers could afford mortgages if interest rates rise.
With rates falling, this approach may be overly restrictive for accessing affordable mortgages.
The FCA aims to ensure firms use the existing flexibility, allowing creditworthy consumers to obtain needed mortgages.
The FCA will soon launch a call for evidence on current and alternative stress testing methods.
In May, a consultation will begin proposing ideas to simplify rules and benefit consumers, making it easier to remortgage with a new lender, discuss options outside regulated advice, or reduce mortgage terms.
In June, a public discussion will open on the mortgage market’s future, involving various stakeholders to consider consumer needs, economic impact, and regulatory roles.
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.”
Chancellor Rachel Reeves said: “This is welcome action by the regulator to kickstart economic growth and help working families get on the housing ladder.
“The world is changing. That is why we must go further and faster in delivering on our Plan for Change, so we can get more money into people’s pockets.”
Tony Hall, head of business development at Saffron for Intermediaries, said: “The FCA’s encouragement of greater flexibility in mortgage stress testing is a welcome step toward in improving access to lending, particularly as interest rates ease.
“However, while the adjustments may help creditworthy borrowers secure financing, it’s essential that lenders apply these flexibilities responsibly to avoid overleveraging and financial strain.”
“Crucially, access to high quality mortgage advice must remain central to any solution.
Hall added: “Mortgage brokers play a vital role in helping borrowers make informed decisions as lending criteria evolve.
“Regulation should not prevent people who can afford a loan from getting the loan size they need, but any changes must be carefully considered to avoid higher default rates, especially if borrowers are navigating options without an adviser’s support.”
