The trade body warned that the success of the reforms will depend on advisers playing a central role in helping borrowers navigate potentially more complex lending options.
In its response to the FCA’s Mortgage Rule Review consultation, Supporting First Time Buyers and Underserved Customers (CP26/18), the AMI said the proposals represent a measured attempt to address barriers to homeownership rather than a return to the looser lending practices seen before the financial crisis.
The organisation said there is scope for lenders to take a more balanced view of risk without undermining consumer protections, opening up opportunities for borrowers who may currently struggle to access mortgage finance despite being able to afford repayments.
Stephanie Charman, the AMI’s chief executive, said the trade body shared the regulator’s desire to improve access to the market.
She added: “We share the FCA’s ambition and have been working with the regulator, consulting with our trade body counterparts and seeking insight from our members to inform our response to these proposals, many of which we deem to be sensible and proportionate for the creditworthy consumers the current rules inadvertently exclude.”
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One of the key areas addressed in the consultation is the future use of interest-only lending. The AMI welcomed the FCA’s acknowledgement that interest-only mortgages should only be suitable for certain groups of borrowers who have a credible means of repaying the capital at the end of the term.
Charman added: “These proposals will only work if lenders and advisers adopt and implement them, otherwise they will fail in their aim to improve access to the market for more first-time buyers. It is important that the areas highlighted by AMI are addressed by the FCA through the final rules and guidance, to ensure firms have the clarity and confidence needed to adopt the proposals effectively.
“That is also why the FCA must clearly define tailored interactive dialogue, with practical examples, to give advisers confidence and limit liability. Advisers also need confirmation that a reasonable assessment made in good faith today won’t be second-guessed decades from now.”
IMLA backs FCA moves towards mortgage flexibility but warns rule changes alone not sufficient
The Intermediary Mortgage Lenders Association (IMLA) also emphasised that interest-only borrowing can help first-time buyers stretch affordability, but safeguards and expert advice remain essential.
It cautioned against borrowers remaining on interest-only terms for extended periods without building equity in their homes. Going further, the IMLA said lenders may decide they need to review the credibility of repayment strategies more frequently than the single review currently mandated.
The association welcomed the fact that many of the proposals are permissive rather than mandatory. The IMLA said lenders are free to decide whether to adopt new practices in line with their risk appetite, operational capacity and commercial judgment.
Kate Davies, executive director of the IMLA, said: “The FCA is asking the right question: are our mortgage rules more restrictive than they need to be? Recent relaxations have been sensible, and there is scope to go further, but nobody, least of all lenders, wants to return to the days of over-exuberant borrowing and lending.
“Our message to borrowers, particularly first-time buyers weighing up options such as interest-only, is simple: speak to a mortgage adviser. Many people assume they cannot get a mortgage, when in reality, they may be closer than they think.
“It is also important to be realistic about what regulation can achieve on its own. For decades, the UK has failed to build enough homes, and no amount of product innovation can compensate for that.
“We would strongly support a well-designed successor to Help to Buy – one [that] increases the supply of smaller homes for first-time buyers and downsizers, avoids inflating house prices, and extends to second-hand properties as well as new build – alongside a detailed review of stamp duty to encourage downsizing and get a sluggish market moving again.”
