The Financial Conduct Authority (FCA) has launched a detailed consultation aimed at boosting mortgage access for first-time buyers (FTBs), the self-employed, and those borrowing into retirement.
Published on 25 June 2025, the discussion paper invites the public and industry to weigh in on modernising responsible lending rules to widen home ownership. With concerns over affordability and rising life expectancy in retirement, the FCA is seeking stakeholder feedback before finalising regulations by mid-2026.
Why the Move Matters
With mortgage lending at a three-year high and average first-time buyer home prices climbing 7.1%, traditional affordability tests may exclude many borrowers. The FCA’s consultation asks whether lenders should factor in longer-term mortgages, more flexible income assessment, especially for gig and self-employed workers, and retirement lending scenarios. This aims to ensure access without compromising responsible lending.
Consultation Details
The discussion paper outlines possible rule changes such as:
- Applying income smoothing or averaging for fluctuating incomes.
- Accepting non-traditional income documentation, including bank statements.
- Redefining retirement lending to reflect different needs.
The FCA has prescribed a mid-2026 target for implementing any updates, following analysis of responses and consultation with industry.
Industry & Stakeholder Reactions
Industry bodies have praised the FCA’s timing. One mortgage adviser told FT Adviser it was a "sensible and timely move." Lenders, meanwhile, are calling for "greater scope to innovate" in product design and income calculation.
First-Time Buyers: The Pressure Points
A recent ONS report revealed only 282,000 first-time buyer mortgages in 2023, the lowest in a decade. Combined with rising property prices (+7.1%), affordability tests have become a barrier. The FCA’s review seeks to correct this by enabling flexible tests and new repayment structures.
Self-Employed: A Forgotten Group
Self-employed individuals often struggle to prove consistent income, a key hurdle under strict underwriting. The FCA’s proposal to average incomes over several years (or smooth peaks and troughs) could alleviate this challenge, allowing better access to mortgages.
Borrowing Into Retirement
As retirees borrow for home improvement or equity release, traditional loan-to-income ratios fail to account for retirement income sources. The FCA’s review will explore frameworks tailored for borrowers using pensions or savings, not just wages.
Conclusion
The FCA’s June 2025 consultation marks a clear effort to recalibrate mortgage lending in line with modern realities: variable incomes, shifting property prices, and evolving borrower needs. By considering flexible income assessments, smoother eligibility criteria, and tailored retirement lending, the FCA listens to concerns raised by advisers and borrowers as affordability tightens.
If the proposed rules are enacted by mid-2026, they could significantly enhance equity of access, especially for young buyers and self-employed professionals, while preserving responsible lending standards. The next steps involve a robust feedback cycle and collaboration with lenders to ensure frameworks are practical and sustainable.
