Strict mortgage lending rules in the UK could be eased as part of regulatory efforts to boost economic growth. The Financial Conduct Authority (FCA) has announced plans to review rules implemented after the 2008 financial crisis, which could make it easier for borrowers to access home loans.
The FCA’s move comes in response to a December request from Prime Minister Sir Keir Starmer, the chancellor, and the business secretary, who asked major regulators to propose measures to support economic growth. The FCA's response, published Friday, includes ideas to adjust mortgage rules and revise the cap on contactless card payments.
The FCA will investigate ways to simplify responsible lending regulations that currently require lenders to test borrowers' ability to repay mortgages under higher interest rates. These rules, introduced to curb reckless lending, have contributed to low default rates and reduced repossessions but may also limit homeownership opportunities.
"We will begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults," said Nikhil Rathi, FCA chief executive.
The regulator will weigh its primary duty of protecting consumers against its secondary objective of promoting economic growth.
The FCA is also considering whether to remove the £100 limit on contactless card payments. Currently, digital wallets such as Apple Pay and Google Pay allow providers to set their own limits, which can exceed this threshold. Scrapping the cap could align contactless cards with digital wallet flexibility and encourage greater consumer spending.
While these changes could stimulate the economy, the FCA will carefully assess their impact on financial stability and consumer welfare. Mortgage defaults remain low, indicating that current rules may be overly restrictive. However, loosening these safeguards will require striking a balance to ensure responsible lending persists.
The FCA will engage stakeholders, including lenders and consumer groups, as it examines these proposed changes. The goal is to simplify regulatory frameworks without compromising the resilience of the financial system or endangering borrowers. Further announcements are expected in the coming months.
