In the FCA discussion paper on mortgage market rules, the regulator said: “We could explore revising our expectation that firms ensure the sale of a property will leave borrowers sufficient funds to not just repay the mortgage but also to buy a cheaper property.
“This could mean the sale of the property would qualify as a credible repayment strategy if it was highly likely to repay the total mortgage amount without having to consider any sums left over or future housing need.”
The FCA said it would “welcome views on increasing short-term flexibility for borrowers within certain defined limits”.
“We could, for example, explore circumstances in which borrowers could more easily shift between repayment and interest-only during the mortgage term without having to set up a repayment vehicle,” it said.
The FCA said product design could include a switch from interest-only to a repayment mortgage at a certain point during the term, or if the contractual monthly repayment was fixed for a period, but the interest rate was variable.
How to get your first-time buyer clients mortgage ready
Sponsored by Halifax Intermediaries
Views on whether shared ownership has ‘appropriate levels of competition needed’
The FCA discussion paper has said research has shown that shared ownership can “provide better outcomes than renting”, largely due to capital appreciation.
Figures also showed that over three-quarters of shared ownership homes sold in 2022-23 went to first-time buyers, but sales of shared ownership mortgages made up around 3% of mortgage sales.
The FCA said the scheme “plays a small but important role in overcoming barriers to ownership, and [it] want[s] to understand if we might be able to help it play a larger role”.
However, its figures show that shared ownership mortgages are, on average, more expensive than standard mortgages.
It added that around 58.6% of shared ownership lending is done by building societies, and this shows that shared ownership is “distinct from mainstream lending”.
“We want to make sure that our rules are not acting as a barrier to entry or adding disproportionate costs to processing these loans. We want to ensure that the sector is as competitive as possible in the interests of consumers,” it said.
It said it wanted to understand if there is an “appropriate level of competition and access in this market” and ensure its rules “treat this form of lending correctly”.
