The Financial Conduct Authority (FCA) continues to review mortgage lending rules in a bid to improve access to home ownership, especially for first-time buyers, the self-employed, and older borrowers.

The UK’s financial regulator has published a discussion paper as part of its wider effort to help potential property purchasers and in turn support long-term economic growth.

The paper outlines potential changes designed to improve flexibility in the mortgage market and make borrowing more accessible by tailoring products to ensure they are more effectively to diverse customer needs.

Key areas under review include updating responsible lending rules, addressing the growing need for later-life lending, enhancing consumer understanding, and encouraging innovation in lending practices.

The regulator wants to hear feedback on what further changes are needed to support mortgage access for those who are self-employed or with volatile income, both for home purchase and in later in life.

“We want to evolve our mortgage rules to help more people access sustainable home ownership,” said David Geale, executive director for payments and digital finance at the FCA.

The FCA is also seeking opinions on whether the stress test for mortgages, which requires lenders to consider the potential impact of likely future changes to interest rates, should be changed.

The paper said: “Many people’s patterns of employment in the UK are now very different to those of earlier generations. There is more use of short-term contracting, zero-hours contracts and more people are self-employed.”

The paper also highlighted homeowners increasingly needing to access their housing wealth to help fund them through retirement.

It said that with 38% of working-age people projected to be under-saving for retirement, “access to mortgages could be key to helping people achieve their financial goals in later life”.

Many lenders will now accept earned income up to the age of 75 in their affordability assessments, but the paper pointed to the fact that some products tailored to older borrowers can generally be more expensive than standard mortgages.

Jim Boyd, CEO of the Equity Release Council, commented: “The discussion paper recognises that mortgage products targeted at older borrowers, whether lifetime, retirement interest-only or other forms of mortgage are increasingly mainstream.

“Two in five UK residents are already over 50 years old and in 15 years’ time half of UK households are anticipated to need to use housing wealth to support their spending needs in later life.

“To help people better navigate their financial lives, we need to ensure that people understand their options and have the products and protections in place to make confident choices. Reflecting this, today’s announcement invites views about how advice qualifications might evolve to enable ‘enhanced advice’ to support consumers make informed decisions.

“While we have seen significant innovation over the last five years, the announcement encourages the industry to continue to challenge itself to adapt to support a broader range of customers who have different needs and aspirations.”

Other discussion points in the wide-ranging paper include the take-up of long-term fixed-rate mortgages; a rent-based affordability assessment; and part interest-only and part capital repayment mortgages.

Lending rules were toughened following the 2008 financial crisis. The FCA said this has led to a more resilient market, with significantly fewer borrowers in arrears and more than 99% of mortgages originated since 2014 being on track.

Rightmove’s mortgage commentator, Matt Smith, said: “It’s really promising that the regulator is opening up these discussions, and continuing to look at targeted regulatory changes that could help people in different circumstances to borrow what they need to buy a home. We particularly welcome the potential to help more first-time buyers that can afford it to borrow more responsibly, and have access to sustainable home-ownership.

“When you consider that many future first-time buyers are trying to save up their deposit, while paying advertised rents which are 41% more than five years ago, the challenge for this group in particular is clear. There are also some significant regional differences in property prices to be mindful of in discussions about enabling people to borrow more, with the gap between average earnings and property prices more stretched in the South of England than the North of England, Scotland and Wales.

“The desire to support more people in achieving their home-ownership aspirations needs to be balanced against the potential risks of allowing people to borrow more, so that mortgage lending continues to be responsible. This balance is complex and is why we welcome the FCA’s approach to open up a wide ranging discussion on what is right.”