The property market is set for a significant boost as the Financial Conduct Authority’s boss Nikhil Rathi (pictured) unveils plan to scrap affordability checks for homeowners looking to remortgage, giving them access to potentially cheaper deals and boosting buyer spending power.

The proposed changes are the result of government pressure on the city regulator to loosen its rules to stimulate economic growth. They are intended to inject fresh impetus into the housing market by enhancing competition between lenders and lowering the cost of owning a home.

Cheaper deals

The FCA has launched a consultation on the changes, which would mean lenders would be able to accept new customers who aren’t borrowing additional money without conducting an affordability check, provided they are up-to-date with repayments and offered a rate equal to or better than what they could secure with their existing lender.

According to the FCA’s consultation document: “These reforms would deliver cheaper mortgage deals to consumers by making it easier to shop around.”

Currently, up to 90% of homeowners stay with their existing lender when their deal ends, often because product transfers require less paperwork and no affordability assessments.

These proposals could be transformative for the housing market.”

“These proposals could be transformative for the housing market,” says Hina Bhudia from mortgage broker Knight Frank Finance, who told The Times Newspaper: “This would be a really sensible step that would benefit large numbers of people, particularly during periods of upheaval that seem to be getting more common.”

The increased spending power from cheaper mortgage deals is expected to translate to higher property valuations and increased transaction volumes. Market analysts are predicting that the proposals could create a virtuous cycle where enhanced competition between lenders leads to better mortgage deals, enabling buyers to stretch their budgets further and stimulating movement up and down the property ladder.

This regulatory shift follows earlier FCA guidance in March that allowed lenders to be more flexible with stress-testing rules, and many major high street banks have already reduced their criteria.

The consultation remains open until June 4, with the regulator also planning to publish a further discussion paper next month examining “risk appetite” in mortgage lending, assessing the balance between looser affordability rules and potential increases in defaults.