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Britain’s financial regulator will allow banks to make more mortgages to first-time homebuyers with low savings or income, responding to government calls for more risk-taking to stimulate the economy. Suggested.
The proposal would lift restrictions on riskier mortgage lending that were imposed on banks after they suffered heavy losses in the 2008 financial crisis, which forced many lenders to be bailed out by the government. There is a possibility.
Nikhil Rati, chief executive of the Financial Conduct Authority, told Keir Starmer this week to help banks strengthen “responsible risk-taking” in the mortgage market, according to people briefed on the matter. , said the watchdog is considering relaxing some of these regulations. letter.
Responses were also sent to Prime Minister Rachel Reeves and Business Secretary Jonathan Reynolds.
The government has asked the FCA and the UK’s other regulators to come up with ideas for rule changes that could increase risk-taking and investment in the economy, as the chancellor seeks to deliver on his promise to boost growth.
Mr Starmer told investors last year that he would “tear down the bureaucracy that hinders investment” in the UK, and Mr Reeves this week called on regulators to explain how he intends to work to boost growth.
The FCA’s proposals, first reported by the Times, do not include specific details of the planned rule changes, but more people will be able to own a home now that default rates have fallen to low levels. The government is proposing to discuss whether mortgage lending rules can be relaxed.
Mortgage lending in the UK is governed by a mix of FCA and Bank of England rules. These restrict banks from holding more than 15% of outstanding mortgages in loans worth more than 4.5 times the borrower’s income.
The FCA could also water down affordability tests to see if a borrower can cope with future interest rate rises, allowing evidence of past rent payments to be used to enable additional borrowing.
Another area that may be considered is the amount of bank capital required to support a mortgage loan representing at least 90 per cent of the value of the property being secured.
The Treasury said Reeves would review the FCA’s proposals and work closely with financial regulators to further develop them.
Mr. Reeves believes that since the financial crisis, there has been unduly intrusive intervention by regulators to minimize risk at the expense of economic growth, the report said.
The Treasury added: “The Chancellor has said he has no intention of returning to the excessive risk-taking of the financial crisis, but is committed to rebalancing the system over time.”
The idea of relaxing mortgage regulations was welcomed by Charles Roe, mortgage director at industry body UK Finance. He said: “A review of mortgage rules will help address affordability issues, not just for first-time homebuyers, but also for those looking to move further up the housing ladder. ” he said.
Some City of London officials have warned that forcing regulators to prioritize growth alongside financial health could be risky.
“It’s always the role of regulators to mitigate the build-up of risk within individual companies across financial markets, without stifling growth,” said Romin Dabil, financial regulation partner at law firm Reed Smith.
“Some might say that a relentless focus on one of these goals can undermine the other,” he added.
Another idea proposed by the FCA is to lift the £100 spending limit on contactless card transactions. This is being imposed out of concern that it could open the door to fraudsters.
FCA declined to comment.
Mr Starmer, Mr Reeves and Mr Reynolds wrote to 17 regulators before Christmas, giving them a January 16 deadline to respond and come up with pro-growth measures that could boost the economy.
On Thursday, Mr. Reeves met with six of those watchdogs and told them they needed a “shift in the way we think about regulation” instead of “an overemphasis on risk.”
The FCA did not attend the meeting, but plans to speak with Mr Reeves in the coming days.
