A Financial Conduct Authority consultation on widening access to mortgages for first-time buyers, later-life borrowers and people with variable or irregular income closed on 28 July 2026. The proposals, set out in consultation paper CP26/18 and published on 9 June, target four groups the regulator says are currently underserved by standard affordability rules: first-time buyers, self-employed and gig-economy earners, older borrowers on retirement interest-only deals, and people with a history of credit impairment.
The FCA has not yet confirmed final rules. It expects to publish feedback on the consultation responses alongside a Policy Statement during the second half of 2026, meaning lenders will continue applying current affordability and interest-only criteria until any new rules take effect.
Retirement interest-only mortgages
For joint retirement interest-only mortgages, the FCA has proposed removing guidance that currently requires lenders to check whether a surviving borrower could afford the mortgage alone after their partner dies. Under the proposal, joint retirement interest-only applications would be assessed the same way as standard joint mortgages, without the separate sole-survivor affordability test.
Lenders and later-life mortgage specialists have argued for several years that the existing guidance discourages retirement interest-only lending to couples, since the sole-survivor test can result in a lower borrowing limit than either partner would qualify for individually. Removing it would not change the underlying loan-to-value or income requirements — only the additional affordability check applied after a partner's death.
Evidencing variable and irregular income
A second strand of the consultation expands the FCA's guidance on what counts as acceptable evidence of affordability for borrowers whose income does not arrive as a fixed monthly salary. This covers self-employed applicants, contractors and people earning through gig-economy platforms, whose income can vary month to month even when their annual earnings are stable.
The proposals also clarify that lenders may agree repayment schedules at frequencies other than monthly, including quarterly payment dates, where that better matches how a borrower's income actually arrives. Under current guidance, most lenders default to monthly assessment windows regardless of how irregular an applicant's cash flow is, which can understate affordability for otherwise creditworthy borrowers.
Smaller interest-only balances, fewer questions
For standard interest-only mortgages, the FCA has proposed removing the requirement to demonstrate a credible capital repayment strategy where the interest-only portion of the loan sits below 25% of the lender's valuation. In its place, the regulator wants a tiered system, with the level of scrutiny over a borrower's repayment plan scaled to the size of the interest-only balance rather than applied uniformly regardless of loan-to-value.
The current 25% threshold has no fixed rule attached to it today — lenders can and do ask for a full repayment-strategy assessment on any interest-only balance, however small. A tiered approach would formalise a lighter-touch check for borrowers with modest interest-only exposure relative to their property's value.
Nothing changes for borrowers applying today
None of the CP26/18 proposals are in force. Applicants going through a mortgage application in August 2026 are still assessed against the affordability and interest-only guidance that has applied throughout 2026, including the existing sole-survivor test on joint retirement interest-only deals and the current interest-only repayment-strategy requirements. Any changes stemming from the consultation would only take effect once the FCA publishes final rules following its Policy Statement.
The FCA's own timeline points to a feedback statement and Policy Statement later in the second half of 2026, without a firmer publication date attached. Lenders that responded to the consultation, including several building societies active in the retirement interest-only market, are expected to review their underwriting criteria once the final rules are confirmed rather than in advance of them.
A market still short of its own average
The consultation lands against a mortgage market that is recovering unevenly. Bank of England data published on 29 July, covering June 2026, showed mortgage approvals for house purchase rose to 58,200 from 56,200 in May — itself a two-year low — but still came in below the six-month average of 61,435. Approvals for remortgaging edged up by 400 over the same period, to 34,200.
The effective interest rate on newly drawn mortgages rose to 4.35% in June, from 4.22% in May, according to the same Bank of England Money and Credit report. Net mortgage borrowing increased to £7.7 billion in June from £3.3 billion in May. The FCA's access proposals are aimed at underwriting criteria rather than pricing, so they sit alongside — rather than in response to — the rate and approvals figures, but both sets of data point to a market where lenders are still cautious about who qualifies and on what terms.