Mortgage rules are being reviewed to boost the economy
Strict rules on mortgage lending may be loosened to allow more people to borrow for a home, as regulators respond to calls to boost the economy.
In a letter to be published later on Friday, the Financial Conduct Authority (FCA) is expected to say it will examine ways to simplify rules brought in after the 2008 financial crisis.
This is likely to review the balance between borrower protection and access to home loans, a move that will be welcomed by lenders.
The FCA will also consider whether to remove the £100 limit on contactless card purchases in line with digital wallets.
Prime Minister Sir Keir Starmer, Chancellor and Business Secretary Wrote to UK chief regulators in December They are being asked to come up with ideas for reforms that can boost economic growth.
He gave a deadline of mid-January. In its response to be published on Friday, the City regulator – the FCA – will outline the various programs already running as part of its growth objective.
But two new ideas will emerge when looking at mortgages and contactless payments.
Stricter rules mean lenders have to make sure people can repay mortgages while testing them for higher interest rates.
Other regulations were also imposed on mortgage providers after the financial crisis of nearly 20 years ago exposed reckless lending and put major financial institutions at risk.
The FCA will point to the current low number of borrowers who are unable to make repayments, or have homes repossessed, as evidence of whether the pendulum has swung too far.
It will consider the balance between its primary objective of protecting consumers and its secondary objective of promoting development.
Lenders will welcome the move, but some may question whether lessons have been learned from the crisis.
Charles Roe, director of mortgages at UK Finance, which represents lenders, said: “Reviewing mortgage lending rules will help address affordability issues, not only for first-time buyers but also for those further on the housing ladder. Want to grow.
“Banks will always lend responsibly but current rules are limiting the number of people who can get a mortgage and therefore the discounts that can be given.”
Another new idea from the FCA is to remove the £100 limit on contactless cards, to make spending easier.
When contactless card payments were introduced in 2007, the transaction limit was set at £10. The cards were typically used as such in place of small change when purchasing snacks, papers, and occasionally groceries.
The limit was gradually raised to £20 in 2012, then £30 in 2015, before rising to £100 in October 2021.
Both ideas would be designed to encourage spending but could also be inflationary. They will have to undergo review and consultation, so even if approved, changes are unlikely to be imminent.
