Strict mortgage lending rules could be eased, making it easier for people to borrow for a home, as the Financial ...

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Strict mortgage lending rules could be eased, making it easier for people to borrow for a home, as the Financial Conduct Authority (FCA) considers ways to support economic growth. The move comes in response to a request from Prime Minister Sir Keir Starmer and key government ministers.

In a letter published Friday, the FCA said it would examine simplifying rules that were introduced after the 2008 financial crisis. Speaking to BBC News, FCA chief executive Nikhil Rathi explained: “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.”

Reviewing Mortgage Lending Rules

The current rules require lenders to rigorously test borrowers’ ability to repay their loans, even under higher interest rates. These safeguards were implemented after the financial crisis exposed risky lending practices that put major financial institutions in jeopardy.

However, with low numbers of repossessions and missed repayments currently reported, the FCA is questioning whether these rules may now be unnecessarily restrictive. The review will assess the balance between protecting consumers and ensuring access to loans, which the FCA sees as key to stimulating growth.

Charles Roe, director of mortgages at UK Finance, told BBC News: “Reviewing the mortgage lending rules would help with affordability issues, not just for first-time buyers but also for those looking to move further up the housing ladder. Banks will always lend responsibly, but the current rules are restricting the number of people who can get a mortgage and so could be relaxed.”

Regional Impacts and Affordability

The FCA’s move has been welcomed by lenders, but some analysts warn of potential risks. Richard Donnell, executive director of research at Zoopla, said: “The big question is whether current rules go too far, but there is a risk for consumers and the government in how far this might go. Finding the balance is not easy and is compounded by the huge north-south divide in affordability.”

Affordability challenges are felt more acutely in some regions, with the north-south divide making it difficult to implement a one-size-fits-all approach. Analysts suggest that any changes to lending rules may need to be carefully tailored to ensure they benefit borrowers across the country.

Lessons from the Past?

While lenders are optimistic about the potential for relaxed rules to improve access to mortgages, some borrowers and experts may question whether the lessons of the 2008 crisis have been fully learned. Striking the right balance between accessibility and financial stability will be critical to the success of these changes.

The FCA’s review is likely to generate significant debate as policymakers, lenders, and consumers weigh the benefits of improved access to loans against the risks of loosening financial safeguards.

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