New affordability checks and mortgage products could give greater flexibility to those on variable incomes, according to proposals from the Financial Conduct Authority (FCA).
The financial regulator is putting forward reforms that seek to make it easier for certain people to get a mortgage approved, taking in their ‘full and current’ circumstances.
Helping more self-employed people get mortgages
The FCA mortgage reforms focus on flexible repayments to help those on variable incomes – such as the self-employed – while maintaining strong consumer protections.
As well as the self-employed, these reforms look to improve options for first-time buyers, older people, and those paid in foreign currency.
Proposed reforms include:
- new rules for interest-only mortgages
- flexible repayment options for people with variable incomes, such as the self-employed
- affordability checks expanded to not automatically exclude those with minor credit history issues
- making it easier for homeowners to use equity built up in their property as part of affordability checks for retirement interest-only mortgages
The financial body highlights that changes should help more people access mortgages while “keeping appropriate safeguards in place”.
Consumers and lenders are being invited to share their views as part of a consultation ending on 28 July.
Help protecting your business
For sole traders, your business assets and your property are all legally linked. This means if something happens and a member of the public holds your business responsible, then the liability you owe could be unlimited.
Business insurance can help protect your business if the worst should happen, and can help cover the legal fees and compensation costs if there’s a claim.
If you run your business from your residential property then it’s important to let your insurer and mortgage lender know, as this could affect your agreements.
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What mortgage reforms could mean for the self-employed
Since it’s just at the consultation stage, any changes aren’t final and will take time to put in place.
If approved, widening the checks and types of mortgage available could help those with an income that can change from month to month. Lenders will be able to get a better picture of whether a mortgage is affordable to someone and flexible repayment options could help those with fluctuating incomes.
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