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Britain’s financial watchdog wants to tear up parts of the mortgage rulebook. The Financial Conduct Authority has put forward a package of reforms aimed at making home loans more accessible for first-time buyers, older borrowers, and people who work for themselves — a chunk of the population that’s long struggled to get through lenders’ front doors.
The proposals, laid out in consultation paper CP26/18, aren’t subtle. They go after some of the most stubborn friction points in the current framework — the ones that push self-employed applicants into rejection piles despite solid finances, or that leave older homeowners sitting on property wealth they can’t easily tap.
Not a small ambition.
What the FCA Actually Wants to Change
The core ask is flexibility. The FCA wants lenders to have more room to assess a borrower’s full, current financial picture rather than knocking people out early because of minor blemishes on their credit history or income that doesn’t arrive in a neat monthly paycheck. That’s a pretty direct shot at the way most high-street lenders currently operate.
For the self-employed, the proposals would reduce barriers around variable income — basically giving lenders clearer permission to work with applicants whose earnings fluctuate month to month. People paid in foreign currency would also get a look-in under the new thinking. Right now, that category is basically a dead end at most UK mortgage desks.
Older borrowers get attention too. The FCA wants to update guidelines around retirement interest-only mortgages, which let homeowners access equity without a fixed repayment schedule. The current rules are seen as too restrictive, leaving a lot of older homeowners unable to unlock value they’ve spent decades building.
And on interest-only mortgages more broadly, the FCA is pushing for more flexibility — though with a caveat. Most borrowers would still need a clear repayment plan in place. The carve-out applies mainly to smaller loan amounts, where the risk profile is different.
99% of Mortgages Since 2014 Haven’t Hit Arrears
Here’s the number that probably matters most for anyone skeptical about loosening standards. The FCA points out that roughly 99% of mortgages taken out since 2014 have not fallen into arrears. That’s a striking track record, and it’s the foundation the watchdog is standing on when it argues that the current framework is probably too cautious in places.
The implication is pretty clear: the rules introduced after the 2008 financial crisis did their job, maybe too well in some corners of the market. The FCA seems to think lenders can now be trusted with a bit more judgment, as long as consumer protections stay intact.
That balance — more lender discretion, no weaker consumer safeguards — runs through everything in CP26/18.
The FCA’s Consumer Duty, which set a high bar for how firms must treat customers, isn’t going anywhere. The new proposals sit on top of that foundation, not in place of it.
Consultation Open, Deadline Late July
The FCA is running an active consultation and wants to hear from consumers, lenders, and anyone else with skin in the game. An online tool has been set up specifically to collect direct experiences from people who’ve tried — and sometimes failed — to get a mortgage under current rules. That’s a bit unusual. Regulators don’t always go that direct with retail consumers during consultation periods.
Responses are due by July 28, 2026.
The feedback will shape how the final rules get written. So the version of CP26/18 that eventually becomes law could look different from what’s on the table right now. Unclear yet how much appetite lenders have for the proposed changes — no major bank positions have surfaced publicly.
The FCA’s five-year strategy, published in 2025, put “rebalancing risk” near the top of its agenda. The mortgage review fits that framing. It’s not about lowering standards — it’s about asking whether the current standards are actually calibrated right, or whether they’ve been locking out creditworthy borrowers for years without anyone really noticing.
Self-employed workers make up a significant and growing slice of the UK workforce. Traditional mortgage frameworks were built around permanent employment with a fixed salary. That model fits less and less of how people actually earn money now. The FCA seems to have noticed.
The consultation paper runs alongside broader FCA work to keep the mortgage market functional as interest rates and living costs have put pressure on household finances across the country. The 99% non-arrears figure gives the watchdog some confidence that the market’s foundations are solid enough to support reform.
Responses to CP26/18 close July 28, 2026.
Frequently Asked Questions
What is the FCA’s consultation paper CP26/18 about?
CP26/18 is the FCA’s Mortgage Rule Review, proposing changes to give lenders more flexibility when assessing borrowers — particularly the self-employed, older homeowners, and first-time buyers — while keeping consumer protections in place.
When is the deadline to respond to the FCA mortgage consultation?
The FCA has set July 28, 2026 as the deadline for responses to its mortgage rule consultation from consumers, firms, and other stakeholders.
