The Financial Conduct Authority (FCA) is preparing to consult on proposals to overhaul mortgage regulations, which will make it easier for first-time buyers and self-employed individuals to secure home loans.
Notably, the regulator's reform package will concentrate on four key areas, including simplifying rules for those entering the property market and other disenfranchised groups.
Later-life lending will also receive attention, with the FCA reviewing retirement interest-only mortgage requirements to improve accessibility.
Public consultations on the proposed regulatory changes will commence in early 2026, with the FCA targeting implementation of initial reforms by the end of that year.
The FCA is consulting on mortgage reforms
|GETTY / PA
A dedicated market study examining future developments in later-life lending will also be launched, with terms of reference due in the first quarter of 2026.
UK Finance's latest mortgage market forecast projects overall gross lending will climb four per cent to reach £300billion next year.
However, the trade body anticipates property transactions will decline by 10,000 compared to 2025 figures.
Remortgaging activity is expected to surge, with external remortgages predicted to rise by 10 per cent and product transfers increasing by two per cent.
Parents are being urged to consider a cost-cutting mortgage | GETTY Some 1.8 million homeowners will see their fixed rate mortgage deals expire during 2026.
The outlook for borrowers struggling with payments appears more positive, with arrears forecast to drop by a further five per cent, continuing the improvement seen throughout 2025.
James Tatch, the head of Analytics at UK Finance, said: "The mortgage market showed strength in 2025, particularly for house purchases.
"But even with welcome tweaks to lending regulations this year, affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026."
He noted that remortgage activity grew as anticipated this year, with further expansion expected as more households reach the end of their fixed rate terms.
Mr Tatch added that arrears numbers have continued to improve as cost and rate pressures have eased, moving towards the historic lows recorded in 2022.
Although possessions increased, they remain well below pre-pandemic levels.
David Geale, the FCA's executive director for payments and digital finance, said: "We have worked at pace this year to improve outcomes for customers wanting a mortgage."
The Bank of England base rate has fallen | CHAT GPT He explained the regulator would draw on feedback from both consumers and the industry to push through additional reforms and redistribute risk, broadening access to affordable home loans.
Mr Geale added: "Reforming the mortgage market can help address the fact that as a society we're saving too little for later life, yet people have huge wealth tied up in property."
The FCA will also promote the adoption of data and technology to enable brokers to deliver faster, improved advice, while collaborating with partners to safeguard vulnerable consumers from financial abuse.
Later this week, the Bank of England's Monetary Policy Committee (MPC) is expected to cut the base rate from four per cent to 3.75 per cent.