New FCA rules mean mortgage applicants with car payments now qualify for thousands more than they did six months ago, according to analysis by Coventry Building Society.
The mortgage lender, which has published the research to coincide with new car registrations being issued at the start of September, said the change is down to new affordability calculations.
The new guidance, dispensed by the Financial Conduct Authority (FCA) came into force at the start of the summer and mean mortgage lenders have more flexibility in their mortgage assessments. They are part of a wider strategy to make homeownership more accessible.
For potential borrowers, having a car loan may not be quite so damaging to your chances of getting a mortgage as it would have been back in March.
Indeed, the building society explained, in March, a single buyer – earning the average UK salary – would see their mortgage borrowing cut by over £18,000 if they had a £345 car payment.
Today, that same car payment takes just £5,000 off their maximum borrowing, allowing them to borrow nearly £13k extra for their home.
For joint buyers who are both earning the average salary, they would have seen their maximum borrowing cut by over £13,000 in March if they each had a £345 car loan. Now their borrowing will be reduced by £5,677, said Coventry Building Society.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “Just a few months ago, a typical car payment could reduce borrowing power by over £18,000 – that could mean people had to compromise on space, location, or put the brakes on their move altogether.
“Now, thanks to regulatory changes, that impact has dropped to around £5,000. It’s a big shift, and it gives borrowers more flexibility to balance lifestyle choices like car ownership with their homebuying goals.
“That said, a car payment still affects how much clients can borrow—it’s just not the deal-breaker it used to be. Brokers can help clients navigate these changes to make more informed decisions, especially when remortgaging or adjusting terms.”
Making mortgages more accessible
Here’s a summary of the FCA changes;
- Borrowers can ask lenders questions without triggering advice rules – this gives them more freedom to explore their options without formal advice.
- There’s no full affordability check for term reductions, making shortening a mortgage term simpler.
- Remortgaging to a cheaper deal may not need a full affordability assessment
- If borrowers choose to go ahead without advice, lenders must make sure they understand what that means.
- Two pieces of older guidance, on interest-only mortgages and cost-of-living support, have been removed.
- The new rules came into effect immediately, so lenders can start applying them straight away.
