The UK’s Financial Conduct Authority (FCA) is set to relax mortgage lending regulations, aiming to boost economic growth and increase access to home loans. The move seeks to strike a balance between protecting consumers and promoting economic growth.
Simplifying Mortgage Rules to Boost Homeownership
The UK’s financial regulator, the Financial Conduct Authority (FCA), has announced plans to simplify mortgage lending rules, aiming to boost economic growth and increase access to home loans. The move is a response to Prime Minister Sir Keir Starmer’s call for regulators to come up with ideas for reform that could stimulate economic growth.
The Current State of Mortgage Rules
Mortgage rules were introduced following the 2008 financial crisis to protect borrowers from reckless lending practices. These rules have led to stricter testing of borrowers’ ability to repay mortgages, which has resulted in lower numbers of borrowers missing repayments or having homes repossessed. The FCA believes that these low numbers suggest that the current rules may be too restrictive.
Easing Mortgage Rules
The FCA will investigate ways to simplify 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. This move is expected to help with affordability issues, particularly for first-time buyers and those looking to move further up the housing ladder.
Scraping Contactless Payment Limits
The FCA’s second new idea is to scrap the £100 cap on purchases made by contactless cards, in line with digital wallets where providers set their own limits. This change would make it easier for people to spend digitally and could encourage spending, but may also be inflationary.
Digital Advances
The letter also outlines potential digital advances, such as requiring firms to accept electronic verification of death to speed up bereavement claims in insurance. These changes aim to improve the efficiency of financial services while maintaining consumer protection.
A Delicate Balance
While some analysts and lenders have welcomed the move, others may question whether lessons have been learned from the 2008 crisis. The FCA must navigate a delicate balance between protecting consumers and promoting economic growth.
