Strict rules on mortgage lending could be loosened to allow more people to borrow for a home, as regulators respond to a call to boost to the economy.
In a letter to be published later on Friday, the Financial Conduct Authority (FCA) is expected to say it will investigate ways to simplify rules brought in following the 2008 financial crisis.
It is likely to review the balance between protecting borrowers and access to home loans, in a move that would be welcomed by lenders.
The FCA will also consider whether to scrap the £100 limit on purchases made by contactless cards, in line with digital wallets.
Prime Minister Sir Keir Starmer, the chancellor and business secretary wrote to the UK’s main regulators in December asking them to come up with ideas for reform that could boost economic growth.
They gave a deadline of mid-January. In its response, to be published on Friday, the City regulator – the FCA – will outline various programmes already underway as part of its growth objective.
But two new ideas will be mooted, looking at mortgages and contactless payments.
Strict rules mean lenders have to be sure that people can repay mortgages, testing them for higher rates of interest.
Other rules were also imposed on mortgage providers after the financial crisis of nearly 20 years ago exposed reckless lending and put major financial institutions at risk.
The FCA will point to current low numbers of borrowers missing repayments, or having homes repossessed, as evidence of questioning whether the pendulum has swung too far.
It will consider the balance between its primary objective of protecting consumers, and a secondary objective of promoting growth.
Lenders would welcome the move, but some may question whether lessons have been learnt from the crisis.
Charles Roe, director of mortgages at UK Finance, which represents lenders, said: “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.
“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.”
The FCA’s second new idea is to scrap the £100 limit on contactless cards, to make it easier to spend.
When contactless card payments were introduced in 2007, the transaction limit was set at £10. Cards were generally used in this way in place of small change when buying snacks, papers and occasional groceries.
The limit was raised gradually, to £20 in 2012, then to £30 in 2015, before going up to £100 in October 2021.
Both ideas would be designed to encourage spending but could also be inflationary. They would need to go through reviews and consultation, so are unlikely to be imminent changes, even if approved.
