The Financial Conduct Authority (FCA) will consult on alternative ways to stress test mortgage applicants and simplify its rules as part of a plan to improve access to mortgages and support homeownership.
This comes after the FCA wrote to the Prime Minister saying it would review regulations.
The regulator said it would launch a call for evidence shortly on current and alternative approaches to stress testing. Then, in May, a consultation will be launched proposing early ideas to simplify its rules to benefit mortgage customers.
These are expected to make it easier for people to remortgage with a new lender, discuss options outside a regulated advice process and reduce their mortgage term.
In June, the FCA will open a public discussion on the future of the mortgage market, with considerations on what needs to be delivered for different consumers and different stages in their lives. It will also discuss what role regulation will play in this.
The regulator also reminded lenders of the flexibility of its rules, saying they could help more people get a mortgage. It said when lenders make decisions on mortgage approvals, they test whether a borrower can still afford payments on a higher interest rate.
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The FCA said as interest rates fall, the approach to this stress testing might be “unduly restricting access to otherwise affordable mortgages”.
Nikhil Rathi, chief executive of the FCA, said: “We are taking swift action to support people in getting the keys to their own home.
“Firms have the flexibility to help more people become homeowners and we want them to use it.
“There is more to be done, and we will be delivering further proposals quickly to support homeownership and the wider UK economy.”
Rachel Reeves, Chancellor of the Exchequer, said: “This is welcome action by the regulator to kick-start economic growth and help working families get on the housing ladder.
“The world is changing. That is why we must go further and faster in delivering on our Plan for Change, so we can get more money into people’s pockets.”
