UK FCA Proposes Major Mortgage Rule Overhaul to Help First-Time Buyers and Self-Employed

The UK's Financial Conduct Authority (FCA) is advancing one of the most consequential reforms to British mortgage lending rules since the post-2008 financial crisis tightening. On June 9, 2026, the regulator published consultation paper CP26/18 on responsible mortgage lending, as part of its broader Mortgage Rule Review. The consultation builds on the FCA's June 2025 discussion paper (DP25/2) and its December 2025 feedback statement (FS25/6).

The central premise is that some current rules — many derived from the post-crisis Mortgage Market Review and the EU Mortgage Credit Directive — may be preventing creditworthy consumers from accessing mortgages that genuinely suit their circumstances. The FCA wants to make targeted, permissive changes that give lenders greater discretion to serve underserved groups, including people with variable or irregular incomes (such as the self-employed), older borrowers, those paid in foreign currency, and consumers recovering from past credit difficulties.

Specific proposals include adapting the requirements for interest-only and part-and-part mortgages, including when a credible repayment strategy is needed and adding examples of acceptable strategies; expanding guidance on assessing affordability for customers with variable income, including the option to agree non-monthly payment schedules; clarifying that the 'credit-impaired customer' definition should not be treated as an automatic indicator of unaffordability; differentiating standards for foreign currency loans; and amending the Handbook definition of regulated bridging loans to include terms of up to 24 months.

Crucially, the FCA stressed that responsible lending requirements and the duty to verify affordability remain firmly in place, as does the Consumer Duty. The changes are permissive rather than mandatory, giving lenders scope to widen access where it aligns with their risk appetite. FCA director of retail banking Emad Aladhal framed the reforms around changing work and longevity patterns, noting that mortgage rules need to keep pace so those who can afford to repay are able to borrow. The consultation closes on July 28, 2026, with a policy statement expected in the second half of the year. The FCA is also gathering consumer views through an online tool, and continues policy work on later-life lending, innovation, and protecting vulnerable consumers.