TL;DR
The FCA has published proposals to help more people access mortgages by refocusing affordability rules. The consultation, published 26 June 2026, proposes replacing the current stress test with a more flexible framework that lets lenders set their own affordability criteria within FCA boundaries. The proposals do not change the Loan-to-Income limits set by the Bank of England Financial Policy Committee.
Last reviewed: 26 June 2026 | Sources: FCA, GOV.UK, HMRC
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Key Facts Consultation published: 26 Jun 2026Current stress test: Reversion rate + 3%LTI limit (FPC): 4.5x income (unchanged)Response deadline: TBC |
What the FCA is proposing
The FCA's consultation paper proposes removing the prescriptive affordability stress test that currently requires lenders to assess whether borrowers could afford repayments if their mortgage rate rose to the reversion rate plus 3 percentage points. The FCA argues this rule, introduced after the 2008 financial crisis, has become overly restrictive as rates have risen, excluding creditworthy borrowers who can demonstrably afford their mortgage at current rates.
Under the proposed framework, lenders would set their own affordability criteria within principles-based FCA rules, assessing income, expenditure, and the borrower's overall financial position. The FCA states this approach gives lenders more flexibility to reflect individual circumstances rather than applying a blanket stress test. The proposals would require lenders to demonstrate their criteria are robust and proportionate.
What stays the same
The Bank of England Financial Policy Committee's Loan-to-Income (LTI) flow limit remains in place and is not affected by the FCA proposals. Under the FPC limit, no more than 15 percent of new residential mortgages can be at an LTI ratio above 4.5. This is a macroprudential tool set by the FPC independently of FCA conduct rules, and the FCA consultation does not propose any change to it.
Lenders must still conduct creditworthiness assessments under MCOB 11 and assess whether a mortgage is affordable for the borrower. The FCA is not proposing to remove affordability requirements -- it is proposing to change how they are calculated.
Who could benefit
The proposals are aimed primarily at borrowers who are currently rejected under the stress test despite having adequate income and demonstrated repayment capacity. First-time buyers with stable employment but modest deposits, borrowers in higher-rate product brackets where the stress test adds significant margin to an already affordable rate, and those remortgaging onto a product they can demonstrably afford at current market rates are identified by the FCA as groups that may benefit from greater lender flexibility.
What lenders and brokers should do now
The FCA consultation is open for responses and lenders should review the proposals and prepare submissions. Brokers should note that no changes take effect until the FCA publishes final rules following the consultation period. Current MCOB affordability rules continue to apply in full. Lenders that are already at or near the FPC's 4.5x LTI limit will see limited immediate benefit from the FCA proposals regardless of their outcome.
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Disclaimer This article is for information only and does not constitute financial or legal advice. Kael Tripton Ltd is an independent editorial publisher and is not regulated by the FCA. |
Frequently asked questions
Will the FCA proposals make it easier to get a mortgage?
If implemented, the proposals could make it easier for some borrowers who currently fail the affordability stress test but have adequate income to service their mortgage at prevailing rates. However the Bank of England's LTI limit of 4.5x income remains unchanged, and individual lenders set their own criteria. No changes are in force yet -- the FCA is at the consultation stage.
When will any changes take effect?
The consultation is open for responses. The FCA will publish final rules after reviewing responses. Given the complexity and significance of mortgage affordability rules, implementation is unlikely before 2027. Current MCOB rules apply in full in the meantime.
Does this affect the Bank of England stress test?
The Bank of England's Financial Policy Committee withdrew its recommendation on the mortgage stress test in 2022. The remaining FCA affordability stress test under MCOB 11 is what the current proposals address. The FPC's LTI flow limit (4.5x income, 15% of flow) is separate and unaffected by the FCA consultation.
Does this apply to buy-to-let mortgages?
Buy-to-let mortgages for investment purposes are largely unregulated by the FCA. The proposals primarily affect regulated residential mortgage contracts. BTL lenders apply their own rental stress tests independently of FCA MCOB affordability rules.
Where can I read the full consultation?
The FCA published the consultation paper on fca.org.uk on 26 June 2026. The full document sets out the proposed changes, the FCA's reasoning, and questions for respondents. Responses can be submitted via the FCA website within the stated deadline.
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Sources FCA: Mortgage Affordability Consultation |
