Mortgage Rules Under Review: End of ‘Computer Says No’?
Peter McGahan
Monday 14th July, 2025.
IF there’s one thing the mortgage market has mastered over the past decade, it’s rigidity. Try explaining to a bank that you’ve just started a freelance career, or that your income comes from a mixture of pensions, rental income, and part-time work. More often than not, you’ll be met with a polite version of “computer says no.”
Change may be on the horizon.
The Financial Conduct Authority’s (FCA) new discussion paper, catchily titled DP25/2 – whoop - could signal a major shift in how lenders assess risk, affordability, and suitability. It’s not law, or policy - yet. But it’s a clear invitation to rethink a system that, while well-intentioned in protecting consumers, may now be locking too many out of homeownership or financial flexibility.
The FCA has recognised what many borrowers have known for years: the rules haven’t kept pace with real life and have the flexibility of uncooked spaghetti.
Take first-time buyers. Nearly 70 per cent of them now borrow over 30 years, not because they’re reckless, but because that’s what’s needed to get on the ladder. What happens when those long loans stretch into later life? Or when your new circumstances don’t fit?
This is where the FCA’s proposals matter. They’re asking whether affordability tests should better reflect a person’s real ability to repay, not just their paperwork. That could be transformative for anyone whose income is irregular, multi-sourced, or based on assets rather than salary.
Real-world benefits? For borrowers with non-traditional income - think the self-employed, contractors, or those juggling multiple roles - these changes could open doors.
The current system often fails to distinguish between unpredictable income and unaffordable borrowing. Very different. But being self-employed doesn't mean you're financially unstable. It just means your income looks different on paper. If lenders are given more flexibility to assess affordability using a broader lens, many of these would-be borrowers could access sensible, sustainable mortgages.
For later-life borrowers, the impact could be even more significant.
We’re living longer, working longer, and retiring differently. Yet many mortgage products still assume retirement starts at 65, and income dries up shortly after. For those who have built up property wealth but lack a generous pension, that creates a frustrating paradox: asset-rich, income-poor, and unable to access the equity in their homes.
The FCA is exploring whether that needs to change, and how.
One potential outcome is a reformed framework for lifetime mortgages and equity release products. If these products become more accessible, more flexible, and better understood, they could provide a lifeline for homeowners looking to fund retirement, cover care costs, or help younger family members onto the ladder.
Imagine being able to access part of your home’s value without being forced to sell, downsize, or navigate a spaghetti of red tape. For many older borrowers, that’s the difference between security and strain.
Also, if lenders are encouraged to innovate, we could see a new generation of later-life lending products, more tailored, more transparent, and more in tune with modern financial realities. Products which allow partial drawdowns, interest payments to reduce debt roll-up, or repayments linked to life events like receiving an inheritance or downsizing.
Flexibility is only helpful if it’s well-managed. Looser lending standards mustn’t become a free-for-all. The FCA’s job is to find the balance - encouraging access without reigniting the blunders of 2008.
Consumers will need clear, balanced guidance to navigate a market which may offer more choice, but also more complexity. And advisers will need to sharpen their understanding of evolving product types and risk profiles - especially when it comes to explaining the long-term costs and implications of equity release.
Still, if done right, this could be the beginning of a more human mortgage system. One which recognises that people don’t all work nine-to-five, retire at 65, are 5ft 9’ and fit inside the same risk profile.
It’s where a person’s potential matters as much as their paperwork.
As ever, the devil will be in the detail. The consultation runs until September, and we’ll know more about the direction of travel once the responses are in. But the tone has been set. The FCA wants to hear how the mortgage market can better reflect how people actually live.
Let’s hope they listen. I’ll update you here.
If you have a mortgage query or would like a complimentary fact sheet on where interest rates may be going, please email our Mortgage Director Pat Greene on pgreene@wwfp.net
Peter McGahan is the Chief Executive Officer of independent financial advisers Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
