Mortgage rules could be eased to boost lending | Global News Avenue

As regulators heed calls to shore up the economy, strict rules on mortgage lending may be relaxed to allow more people to borrow money to buy homes.

Britain’s financial regulator, the Financial Conduct Authority (FCA), said in a newly published letter that it would investigate ways to simplify rules introduced after the 2008 financial crisis.

It is likely to review the balance between protecting borrowers and accessing home loans, a move that will be welcomed by lenders.

The FCA will also consider whether to remove the £100 cap on contactless card purchases, in line with limits set by digital wallet providers themselves.

Prime Minister Sir Keir Starmer, Chancellor of the Exchequer and Business Secretary Letter to key UK regulators in December Ask them to come up with ideas for reforms that can boost economic growth.

The deadline they gave was mid-January. exist Its response was released on Fridaythe FCA outlined various initiatives underway as part of its ambition to boost growth.

But two new ideas are being discussed, namely mortgages and contactless payments.

Tough rules mean lenders must ensure people can repay their mortgages and test them for higher interest rates.

Other rules were imposed on mortgage providers in the wake of the financial crisis nearly 20 years ago, exposing reckless lending practices and putting major financial institutions at risk.

The FCA points to the current low number of borrowers who are behind on their repayments or whose homes have been repossessed as evidence to question whether the rules are too stringent.

“We will start to simplify the rules for responsible lending and mortgage advice, support home ownership and open discussions on the balance between lending access and default levels,” FCA chief executive Nikhil Rathi said in the letter.

It will consider the balance between the primary objective of protecting consumers and the secondary objective of promoting growth.

Lenders welcomed the move, but some analysts and borrowers may question whether lessons have been learned from the crisis.

Charles Roe, head of mortgages at UK Finance, which represents lenders, said: “A review of mortgage rules will help address affordability issues, not just for first-time buyers but also for those looking to move further up the housing ladder. explain.

“Banks will always lend responsibly, but current rules limit the number of people who can get a mortgage, so this can be relaxed.”

Analysts said the move could be more beneficial to some parts of the country.

Richard Donnell, executive director of research at Zoopla, said: “The big question is whether the current rules go too far, but how far consumers and governments are at risk from going too far.”

“Finding that balance is not easy, and the huge gap in affordability between the north and the south makes it even worse.”

The FCA’s second new idea is to remove the £100 limit on contactless cards to make them easier to spend.

When contactless card payments were introduced in 2007, the transaction limit was set at £10. Cards are often used instead of small change when buying snacks, paper and the occasional groceries.

The limit was gradually increased, to £20 in 2012, £30 in 2015 and finally to £100 in October 2021.

Both ideas aim to encourage spending but could also stoke inflation. They are subject to review and consultation, so changes are unlikely to be made immediately even if approved.

The letter also outlines potential digital advances, such as requiring companies to accept electronic verification of death to speed up bereavement claims in insurance.