Homeowners could save money on their mortgage under new rules
The City regulator's shake-up aims to introduce greater flexibility and help individuals better manage their financial lives.
A key part of the reform involves the FCA removing existing guidance that it deems to have "served its purpose," a move intended to reduce the regulatory burden on financial firms.
This adjustment means borrowers could find it simpler to shorten their mortgage term, potentially lowering the total cost of borrowing and mitigating the risk of repayments extending into retirement.
Crucially, the requirement for a full affordability assessment will be lifted when a borrower seeks to reduce their mortgage term.
However, the regulator has stressed that lenders are still expected to consider affordability diligently when implementing these new flexibilities.
Firms retain a responsibility to act to avoid causing foreseeable harm to customers and must continuously monitor and review the outcomes experienced by their borrowers.
People should also find it easier to switch to a new lender to remortgage, if they wish to, helping them to access cheaper products.
Consumers could see their choice improved by allowing for simpler affordability assessments, where a proposed remortgage is on similar terms to an existing contract, but more affordable than a new deal indicated by a customer's existing lender.
The FCA expects many borrowers to continue to benefit from regulated mortgage advice.
Lenders are expected to consider what is appropriate to identify consumers who need advice or other support.
Emad Aladhal, director of retail banking at the FCA, said: 'We are helping more people navigate their financial lives by supporting those who can afford to buy a home and supporting competition in the mortgage market.
'Consumer needs have changed over recent years, and our rules are changing too.
'Today's changes support growth by simplifying some of 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.
'These reforms are another significant step in our mortgage rule review, which we're delivering quickly.
'They are supported by the strong protections we've already put in place for consumers in the mortgage market.'
The regulator said reform of the mortgage market is possible due to the continuation of high standards, such as the Consumer Duty, which requires lenders to put customers at the heart of what they do, as well as effective affordability checks and support for people in financial difficulty.
The FCA's policy statement said regulatory reforms introduced after the 2008 financial crisis have improved standards across the mortgage market, with overall mortgage arrears and repossessions remaining low by long-term standards.
The regulator said that, while changes are voluntary for firms, supporting sustainable home ownership and a competitive mortgage market is a collective responsibility.
Changes to mortgage rules were included in the FCA's letter to Prime Minister Sir Keir Starmer earlier this year, linking with the Government 's aims to support economic growth.
As part of its wider mortgage rule review, the regulator has opened a public discussion on the future of the mortgage market.
It is inviting feedback until September 19 2025.
Many lenders have recently made changes enabling some people to potentially borrow more, following clarification from the regulator.
Paul Matthews, senior director of risk at leading financial services consultancy Broadstone, said: 'The FCA is taking significant steps to make it easier for consumers to make changes to their mortgages and get better support on their available options.
'The easing of regulation will allow lenders greater flexibility to innovate in the market.'
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