Lenders were “too cautious” in granting their first acquirer's mortgage under current rules, according to financial conduct authorities.
FCA CEO Nikhil Rathi (pictured) argued that under existing regulatory rules, lenders have some “flexibility” in stress testing applied to home buyers who come to the market for the first time. 
Lati was giving a speech in front of the Ministry of Finance this morning. This came when the city's watchdog published a five-year plan that promised to “rationalize” its priorities and take a less “normative” approach to regulations.
However, the UK's biggest regulator leader added that lenders could do more to support FBS, and warned that loose lending would inevitably mean more defaults.
Rathi said: “Already, lenders can make decisions about how to do stress tests, and some lenders think they are too cautious at the level of interest rates they are highlighting.”
He added: “We know that rents are very high in many parts of the country. People can obviously pay those high rents and keep their funds in doing so, but if your monthly mortgage payment is slightly lower than that rent, it may not meet the affordable tests that are still there.
“We have to ask questions. Is that a wise position for us to get in, or do we need to show a little more flexibility in that area?”
Rathi's comments came after the UK's finances sought a limit on existing 4.5 times loans set at 15% across the major lender portfolio to be eased last week.
Last month, Nationwide also called for the restrictions to be lifted after being forced to retract loans to the mortgage range of aid targeted at FTBS due to risk of violating current rules.
However, Robert Sinclair, the association's senior advisor to mortgage brokers, agreed last month that flexibility was listed in some stress testing rules.
Sinclair said: “Lenders have already surpassed the 'standard fluctuation rate and 1%' ruling if they can justify their thinking towards regulators.
“Regulators claim this is already a lender's gift, and what they actually want is a regulatory cover to do what they're already allowed.”
The FCA said it will consult with lenders and consumer groups over the stress testing rules.
Rathi added: “We'll relax the lending standards so that more FTBs can acquire homeownership, but we can't do that. The same goes for the fact that the defaults will be less.”
FCA Head noted that property is around 1,000 per quarter, a historically low figure.
“So there's a trade-off here, people are kept at home, but there's a build-up of balance.”
Regulators are under pressure to ease rules to promote UK growth following Prime Minister Rachel Reeves' house speech last November.
Reeves added that she hopes the square miles will play a key role in driving the government's growth.
