Changes to mortgage lending and contactless limits proposed in economic push
The Financial Conduct Authority (FCA) is considering a shake-up of mortgage and contactless payment rules as part of broader efforts to stimulate economic growth. The regulator is exploring the simplification of mortgage rules, which could assist prospective homeowners in securing a property.
In response to the Government's query about its plans to support economic growth, FCA chief executive Nikhil Rathi stated that the authority would "Begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults."
The FCA also intends to collaborate with the Government to eliminate "overlapping standards" such as the Mortgage Charter. This charter was adopted by many lenders to aid borrowers struggling with repayments in a high mortgage rate environment, although various forms of support were already being offered by banks and building societies.
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After the 2008 financial crisis, mortgage lending rules were tightened to prevent a return to irresponsible lending. The letter also suggested that the regulator "could also remove the £100 contactless limit, allowing firms and customers greater flexibility, drawing on US experience, and levelling the playing field with digital wallets".
The limit for contactless card payments has been increased several times over the years.
The Financial Conduct Authority (FCA) indicated it might establish new digital service standards, such as making firms digitally verify death to expedite insurance claims for the bereaved.
The organisation is also looking to streamline processes for emerging businesses, hinting at more frequent signals that the FCA is 'minded to approve' start-ups, which could assist in their funding ventures.
Additionally, in collaboration with the Treasury, the FCA aspires to forge a legislative framework facilitating limited regulated activities under simplified conditions for pertinent firms.
Regulatory oversight of mortgage lending encompasses both the FCA and the Bank of England.
Charles Roe, the Director of Mortgages at industry body UK Finance, commented: "Reviewing the mortgage lending rules would help with affordability issues, not just for first-time buyers but also those looking to move further up the housing ladder."
He added: "Banks will always lend responsibly but the current rules are restricting the number of people who can get a mortgage and so could be relaxed."
Adding his view from the property listings angle, Matt Smith from Rightmove stated: "It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like. Regulatory change is what we've been calling for, as that is what is needed to truly impact home mover affordability, particularly for first-time buyers."
"We've seen some innovative products and schemes announced by lenders to try and do their bit to support home-buyers, but they need support from both the Government and regulators to really drive more options for people."
However, Rocio Concha, Which?
Director of Policy and Advocacy, cautioned against seeing consumer protections as obstacles to growth.
She stated: "The Financial Conduct Authority and government are right to explore ways to boost economic growth, and Which? would never stand in the way of cutting unnecessary red tape. However, viewing consumer protections as a barrier to economic growth is misguided."
"Well designed regulations that empower consumers to switch from bad to good products and services which give them the confidence to try new products and services without the fear of being ripped off are essential to creating dynamic markets that reward investment and innovation."