Despite the shifts in the UK economy since the start of the century, little changes have been made to lending rules for aspiring homebuyers. Yet the Financial Conduct Authority (FCA) has recently published a report assessing the present state of the UK housing market and outlining several proposals intended to adjust lending rules more favourably towards the average UK homebuyer. This has, in many respects, reignited an important discourse pertaining to present lending rules and the various changes which should be applied to meet the demands of the consumer.
Present Issues
As the FCA showed, the average first-time buyer is likelier to be older and borrowing for longer than a homebuyer in the 1980s, partly informed by the average property price doubling over the past two decades from £85,000 to £268,000. In London, the average first-time buyer is aged 33, compared to 32 in the South West and 30 in Northern England.
The FCA revealed that last year 68% of first-time buyers borrowed on terms which exceeded the 30-year mark, which is typically viewed as the average length of a mortgage scheme. To put this into perspective, this is a 43% increase in the volume of first-time buyers selecting mortgage schemes lasting longer than 30 years compared to 2012.
According to Mogo Mortgages, the average first-time buyer will not pay off their mortgage until they are nearly 64 years old. The longer mortgage length coincides with the FCA’s identification that 38% of working-age people are projected to be under-saving for retirement.
As of December 2024, there were approximately 12.5 million outstanding mortgages totalling £1.68 trillion, with the average outstanding mortgage debt per house around £134,494. Tethered to this information is the statistic that the average monthly mortgage payment is around £1,428.
In turn, the age at which the average homebuyer is acquiring a property is much later than what was traditionally expected. Along with other broader macroeconomic factors such as wage growth, property prices, and interest rates, this has contributed towards mortgage lengths lasting for a longer period of time.
FCA Proposals
‘To help people better navigate their financial lives’, Jim Boyd, CEO of Equity Release Council, said, ‘we need to ensure that people understand their options and have the products and protections in place to make confident choices.’ Such understanding will play a crucial role in shaping lending practices that enable homebuyers to secure preferable mortgage schemes tailored to their financial circumstances.
Hence the importance of David Geale, executive director for payments and digital finance at FCA, expressing the commitment to ‘evolve our mortgage rules to help more people access sustainable home ownership.’ ‘Changing our mortgage rules’, Geale added, ‘could make it easier for people to get onto the property ladder and manage mortgages into retirement.’
Some of the proposals, subject to further review, include embracing more digital technology to make the lending system more accessible, thereby cutting the average waiting times for homebuyers looking for a mortgage; constructing mortgage schemes which target customers over the age of 50, an industry which is expected to rapidly grow over the next decade; and readjusting the standard affordability criteria that accounts for a homebuyers’ income, employment circumstances, and rent history.
These proposals are set to go a long way in what Sarah Pritchard, deputy chief executive of FCA, called ‘once-in-a-generation reforms’, adding that these reforms ‘will help people navigate their financial lives and give them greater confidence to invest. This is a win-win for customers and firms alike.’
So crucial are these reforms that Chancellor of the Exchequer Rachel Reeves commented: ‘Too many people are missing out on the support they need to build a more secure financial future for themselves and their families. Today’s reforms will make a real difference to help working people make better long-term financial decisions’.
Such proposals, moreover, have found wider support within the property community. Matt Smith, mortgage commentator at Rightmove, 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.’
Lending Practices
Overall, the proposals illuminate many of the flaws underpinning present lending practices, particularly when it comes to lacking engagement with the present financial circumstances of the average UK citizen – a demographic which is acquiring property at an older age relative to previous generations.
Focusing on adjusting lending practices which directly account for the financial circumstances of the average UK homebuyer will enable more homebuyers to land on the property market. More favourable terms finely tuned to facilitate, not inhibit, the aspiring homebuyer will significantly benefit the UK property market.
