Homeowners may soon find it easier to remortgage or adjust their mortgage terms under proposed reforms announced by the Financial Conduct Authority (FCA).
The regulator has unveiled plans to simplify mortgage rules and encourage more competition between lenders. Certain existing guidance that the FCA says has "served its purpose" will be scrapped, reducing the administrative burden on lenders.
This should provide borrowers with more flexibility if they want to shorten their mortgage term, helping to lower the cost of borrowing and reduce the risk of repayment extending into retirement.
Currently borrowers wanting to reduce their mortgage term must undergo a full affordability assessment, but they would no longer have to do so under the FCA’s new proposals. However, the FCA has said that lenders must still act responsibly, ensuring that that affordability is still carefully considered where relevant.
Switching lenders to be made simpler
The FCA’s mortgage reforms also aim to make switching lenders easier for those looking to remortgage.
Provided the new mortgage is on similar terms but more affordable than the borrower’s current deal, affordability assessments should be less onerous, ensuring borrowers have more access a to a wider range of better deals.
Despite the rules being simplified, the FCA says many borrowers will continue to benefit from regulated mortgage advice. Lenders must still identify and support customers who may need guidance or additional help.
Emad Aladhal, director of retail banking at the FCA, said: “These changes support growth by simplifying our rules, saving consumers time and money, while ensuring they still benefit from advice where needed. We want lenders to use these changes to innovate and better serve aspiring homeowners and existing borrowers.”
The reforms are part of the FCA’s broader review of mortgage regulation, which has already prompted some lenders to make changes that allow certain borrowers to access larger loans. Strong existing consumer protections, such as the Consumer Duty, which means lenders must act in the best interests of their customers, remain in place.
The new changes will be voluntary for lenders, and the FCA is seeking public feedback as part of its wider mortgage rule review, with a discussion period open until 19 September 2025.
