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Mortgage lenders in the UK have said they can now lend around £30,000 more to the average borrower due to changes to affordability rules, the chief executive of the Financial Conduct Authority, FCA, has said. Nikhil Rathi said the changes were judged ‘a risk worth taking’. He was giving a speech in which he highlighted the need for financial capability the knowledge, confidence and support to make good choices and avoid bad ones. Rathi said: ‘Lenders have told us that they can now lend around £30,000 more to the average borrower as a result of our changes to mortgage affordability rules. ‘We judged this a risk worth taking, allowing more people the security that comes with home ownership.’ Many lenders have recently made changes allowing some homeowners to borrow more, following clarification from the FCA. In June, the FCA also launched a ‘public conversation’ on the future of the mortgage market as part of work to help consumers navigate their finances and to support economic growth. Feedback on its discussion paper closed in September. The regulator has been looking at whether there is more that can be done to help first-time buyers, people who are long-term renters with aspirations to get into the housing market, as well as people in later life who may have significant equity in their home. Potential changes to lending rules enabling more people to access mortgage finance could involve accepting a greater risk of future arrears. The Bank of England has previously recommended that some lenders can offer more high loan-to-income mortgages if they choose to. Toughened mortgage rules were introduced following the 2008 financial downturn to help make sure people are able to repay what they owe and ensure support for those in financial difficulty. In 2023, the FCA introduced the Consumer Duty, setting a higher standard for consumer protection across retail financial services. The duty has a focus on firms needing to ensure good outcomes for consumers. Speaking at the Fair 4 All Finance Delivering Financial Inclusion Together conference, Rathi highlighted the need for people to have knowledge, confidence and support to make informed decisions about their finances generally. He said: ‘We now need to connect financial inclusion and capability. Improved inclusion should be the goal, but capability needs to be enhanced at the same time, and potentially more quickly. ‘The Treasury Select Committee underlined this point in their recent work on Isas, warning against pushing people into riskier investments without the understanding to manage them. They called for a focus on stronger capability and access to advice. ‘If we expand access with capability baked in, we build individual resilience and security.’ In October, the Treasury Committee urged the government not to cut the cash Isa limit in the hope of persuading more people to invest in stocks and shares, saying such a move would be unlikely to incentivise savers. The committee said the focus instead should be on improving financial literacy and enhancing access to good advice and guidance, so people can make informed decisions with their savings. Rumours that the cash Isa limit could be reduced have been circulating for months and it is understood several potential options have been mulled over. More than 14 million people in the UK are thought to have more than £10,000 saved in cash, and the government believes some of this could be invested in the stock market to improve people’s financial health. Speaking about financial capability generally, Rathi said: ‘We need to build skills that let people navigate products that may not even yet exist in an AI-driven and automated future while reaching those excluded from the system and encouraging those who opt-out to re-engage. ‘This is not the responsibility of one institution like the FCA. Neither financial inclusion nor improving capability are within our exclusive remit. But we are uniquely placed to help fill some of the gaps. ‘We can remove barriers either perceived or actual that stand in the way of firms wanting to do the right thing.’ Rathi also highlighted the roles that government bodies, banks, schools and industry have to play in building people’s financial capability. He added: ‘We have made much progress on financial inclusion. But widening access without raising capability leaves people with more choices they don’t feel ready to make. ‘If we lift capability to match inclusion, buffers rise; cover improves; more people save and invest with confidence; scams fall. ‘Decisions are taken at the right time, for the right reasons. Trust in the system grows.’ By Vicky Shaw, PA Personal Finance Correspondent Press Association: Finance source: PA Copyright 2025 Alliance News Ltd. All Rights Reserved.
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