FCA's Mortgage Rule Shake-Up: What It Could Mean for You

The Bank of England held the base rate at 3.75% again on 30 July — the fifth hold in a row — and I don't think that was actually the biggest mortgage story of the summer. Tucked away in a Financial Conduct Authority consultation paper is a set of proposed changes that could reshape who gets approved for a mortgage in the first place. If you've ever been turned away because your income doesn't arrive as a neat, identical monthly payslip, this one is worth ten minutes of your time.

What the FCA Is Actually Proposing

Back in June, the FCA published a consultation (CP26/18) setting out its most significant review of mortgage lending rules in years. The stated aim is to open the door to people who are currently being shut out of the market: first-time buyers, the self-employed, people with variable or irregular income, later-life borrowers, and anyone with a bit of credit history baggage from a few years back.

The consultation window closed on 28 July, and the FCA says it's aiming to publish a formal policy statement in the second half of this year. So nothing has changed yet — but the direction of travel is unmistakable, and it's worth understanding now rather than when the rules land.

Irregular Income Shouldn't Mean Automatic Rejection

Here's the bit that will land closest to home for a lot of my clients. Most lenders still assess affordability on the assumption that income arrives in identical monthly instalments, which is a poor fit for freelancers, contractors, and anyone paid in irregular chunks — even when their annual earnings are perfectly healthy.

The FCA is proposing to expand its guidance with concrete examples of what counts as acceptable evidence for variable income, and to clarify explicitly that lenders can agree payment schedules at frequencies other than monthly when assessing affordability. In plain terms: the regulator is telling lenders they have more room to say yes than some of them currently use.

A Fairer Deal for Later-Life and Retirement Borrowers

There's also a proposed change for retirement interest-only (RIO) mortgages. Under current guidance, joint RIO applications can be assessed more restrictively than a standard joint mortgage. The FCA wants to remove that distinction, so couples applying together in retirement are assessed on the same basis as any other joint application. It sounds technical, but for the retired couples I speak to who feel like the system wasn't built with them in mind, it's a meaningful shift.

What Happens Next

To be clear, none of this is law yet. The FCA will digest the consultation responses and publish a policy statement later in 2026, and any rule changes will follow from there — likely with a further implementation period before lenders update their own criteria. This is a "watch this space" story, not a "everything changed overnight" one.

What This Means for You Right Now

Even before the rules formally change, there are things worth doing today:

1. If you're self-employed or have irregular income, start gathering your evidence properly now — SA302s, two to three years of accounts, signed contracts, bank statements showing the pattern of payments. Lenders that already lean towards flexibility will move faster with a well-organised file.
2. If you're retired or considering a RIO mortgage, don't assume you'll be automatically declined jointly — get advice first, because criteria already vary a lot between lenders.
3. If you're a first-time buyer who's been told "no" once, that doesn't mean "no" everywhere. Some lenders already underwrite more generously than the regulatory minimum requires, and a broker who knows the manual-underwriting lenders can make a real difference.
4. On rates, with the base rate held at 3.75% and the best five-year fixes still sitting around 4.50%, it's worth getting a decision in principle sorted sooner rather than later so you're ready to move when you find the right property or the right rate.

Regulation moves at its own pace, but this consultation tells you clearly where the market is heading. If any of the situations above sound like yours, don't wait for the policy statement to land — get in touch and let's see what's actually possible for you today.

Kindest regards,

Ian

Ian A Moore CeMAP — Director, IM Mortgage Consultancy Limited

Your home may be repossessed if you do not keep up repayments on your mortgage. IM Mortgage Consultancy Limited is authorised and regulated by the Financial Conduct Authority. This article is for general information only and does not constitute mortgage advice; rates and figures quoted were accurate at the time of writing and are subject to change.