The Financial Conduct Authority (FCA) just released some exciting proposals. These initiatives will assist first-time buyers and self-employed Australians to enter the property market. This $10 million pilot revolves around the growing concerns that existing lending practices are constraining access to affordable mortgage products. As the FCA’s announcement makes clear, some lenders’ approaches to stress testing “are leading to a significant number of people being unnecessarily denied access to affordable mortgages.”
To be clear, in recent months, almost all lenders have lowered the interest rate used for stress testing borrowers. This shift would increase the number of people who are able to obtain mortgages. Mortgage lenders typically cap mortgages at no more than 4.5 times a borrower’s income. With so much going on, it’s increasingly important for serious buyers to cut through all these limitations and distractions.
To address these challenges, the FCA plans to consult on reforms to the mortgage market, aiming to simplify existing mortgage rules. The proposed changes are intended to create more flexible products that reflect varying working patterns and income levels throughout different life stages.
As of this past Monday, the average two-year fixed mortgage rate has climbed to 4.84%. At the same time, the five-year fixed rate rose to an average of 4.91%, said Moneyfacts. These numbers show a modest cooling of rates relative to the spring and summer months earlier this year. Indeed, in November, the typical UK house price hit a record £272,998 (Nationwide). This increase has a big impact on first-time homebuyers facing a national median home price of nearly $430,000.
According to NAR data, first time buyers are at the highest level on record. These movers took out an average mortgage of £210,800 in the year to September, Savills said. Yet annual house price growth has been cooling. It fell from 4.7% at the end of 2024 to 2.1% in the middle of 2025. By November, it had dropped even further to 1.8%.
Robert Gardner, the chief economist at Nationwide, provides some scope to what lies ahead for the housing market, saying that
“We expect housing market activity to strengthen a little further as affordability improves gradually via income growth outpacing house price growth and a further modest decline in interest rates.”
Looking forward, Rightmove is forecasting that house prices will increase by about 2% in 2026. This projection is in line with Gardner’s forecast that prices will rise by 2-4% next year.
In many parts of northern England, house prices have declined by over 30%. They are now almost 58% of what’s spent in the deep south areas. This gap is still shaping the choices that first-time buyers can make and the mortgage products that are available to them. A cocktail of rising wages and relaxed mortgage affordability assessments have allowed first-time buyers to take out the largest-ever mortgages.
Matt Smith, an economic adviser at Rightmove, explained how the landscape is changing for prospective home movers. He remarked,
“Those who are seeing slightly lower house prices in their area compared to last year and may have also had an end-of-year pay rise will see their affordability improved further.”