This article is for general information only. It is not financial advice and does not recommend a specific lender or product.

The Financial Conduct Authority (FCA) has published a consultation paper (CP26/18) setting out proposed changes to how mortgage lenders can operate in the UK. Some of these changes could make certain types of mortgage more accessible. But it is important to be clear about what has actually been proposed, and what has not changed at all.

What borrowers need to know

The FCA's proposals cover three main areas:

  • Interest-only and part-and-part mortgages. Lenders may find it easier to offer these products under the proposed rules. At the moment, lenders face restrictions that make some of them cautious about interest-only lending. The proposals aim to reduce that caution where it is not genuinely protecting borrowers.
  • Borrowers with a history of credit problems. The proposals would end the practice of lenders applying a blanket decline to anyone labelled "credit-impaired." Under the new approach, lenders would need to assess each borrower individually rather than refusing all applications from a broad category.
  • Bridging loans. The permitted term for regulated bridging loans could be extended from twelve months to twenty-four months. This would give borrowers more time to arrange longer-term finance.

These are proposals, not final rules. The FCA will review responses to the consultation before publishing final rules, which are expected in the second half of 2026.

Why it matters

For some borrowers, these changes could open up options that were previously difficult to access.

A simple way to think about it: the current rules were written to prevent risky lending after the 2008 financial crisis. The FCA believes some of those rules have become too rigid in places, and that careful, case-by-case lending could serve borrowers better without increasing overall risk.

The important bit is that this is targeted flexibility in specific areas, not a general relaxation of mortgage standards.

What stays the same

Affordability checks are not changing. Every lender will still need to satisfy itself that a borrower can reasonably afford the repayments, taking into account their income, outgoings and likely future circumstances.

Consumer Duty obligations also remain. Lenders are still required to act in their customers' best interests and to avoid causing foreseeable harm. These rules came into force in 2023 and are not part of the CP26/18 proposals.

In plain English: lenders are not being told to approve more applications. They are being given more room to make sensible, individual decisions in areas where blanket rules were working against borrowers.

Who may be affected

These proposals are most relevant if:

  • You are considering an interest-only or part-and-part mortgage and have previously been told your options are limited.
  • You have some negative marks on your credit file and have been declined without a detailed explanation.
  • You need a bridging loan and are worried about completing your onward purchase within twelve months.

If none of those situations apply to you, the day-to-day mortgage market is unlikely to feel very different once final rules come into force.

Risks and warnings

Mortgage borrowing is a significant long-term commitment. A few things worth keeping in mind as this consultation plays out:

  • These are proposals. The final rules may look different from what has been consulted on.
  • Even if lenders gain more flexibility, they are not obliged to use it. Each lender will set its own criteria within whatever framework the FCA finalises.
  • Interest-only mortgages require a credible plan to repay the capital at the end of the term. Without one, the flexibility to borrow on interest-only terms could leave you in difficulty later.
  • Bridging loans are short-term, higher-cost products. A longer permitted term does not make them a substitute for a standard mortgage.

If you are already struggling with mortgage repayments or other debts, free, confidential help is available from:

  • StepChange, 0800 138 1111
  • National Debtline, 0808 808 4000
  • MoneyHelper, 0800 138 7777

What to read next

For a fuller explanation of how mortgages work in the UK, including the different types and what lenders look for, see the Mortgages guide.

Sources

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