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Rachel Reeves, the UK’s Chancellor of the Exchequer, has endorsed proposals from the Financial Conduct Authority (FCA) to examine ways of permitting banks to take greater risks in mortgage lending, aiming to increase home ownership across Britain.
Speaking to the Financial Times, Reeves expressed her support for the FCA’s plans to lift certain mortgage restrictions, stating she was “absolutely open to looking at ideas that can boost home ownership and help working families get on the housing ladder.” The announcement comes as she heads to Davos to promote the UK as an investment destination at the World Economic Forum.
The Treasury has positioned itself at the centre of governmental efforts to encourage regulators to develop growth-enhancing measures. During recent meetings with UK rulemakers, Reeves emphasised her concern that current regulations focus heavily on risk management while potentially overlooking opportunities for economic growth.
Present mortgage lending controls in Britain, implemented following the 2008 financial crisis, consist of rules from both the FCA and the Bank of England. These regulations limit lending based on income multiples and property values, while requiring rigorous affordability assessments for potential rate increases.
The push for lending reform comes against a backdrop of declining home ownership, which fell from 64.3 per cent in 2011 to 62.5 per cent in 2021, according to Office for National Statistics data. Property experts have identified the FCA’s stringent affordability stress tests as a significant barrier preventing more individuals from securing mortgages.
Despite facing criticism over recent fiscal decisions, including raising employer national insurance contributions, Reeves maintains that her budget decisions were necessary to establish economic stability. She remains committed to her fiscal rules, describing them as “non-negotiable,” whilst emphasising the importance of balancing risk management with economic growth initiatives.
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