A growing number of homeowners are using modified affordability assessments to move their mortgage to a new lender, providing a potential route forward for borrowers who have maintained their payments but no longer fit conventional underwriting models.

Analysis from mortgage network Stonebridge shows that 5,828 mortgages were completed using modified affordability assessments during the first quarter of 2026, representing an annual increase of 30.2%.

Almost all those borrowers moved to a different lender.

The proportion of modified-affordability cases involving an external remortgage increased from 87.7% in the first quarter of 2025 to 98.3% during the same period this year. Meanwhile, their use for product transfers with the existing lender fell sharply, from 550 cases to 100—a decline of 81.8%.

The figures suggest that regulatory changes introduced by the Financial Conduct Authority are beginning to produce a more competitive remortgage market for borrowers who might previously have believed they were trapped.

Since 21 July 2025, lenders have been able to use a modified affordability assessment where a borrower wants to move to a more affordable mortgage with a different lender, including where the new arrangement costs less than a product available from the existing provider.

The rules recognise that a borrower who has already demonstrated the ability to maintain a more expensive mortgage may, in suitable circumstances, be able to afford a replacement product carrying lower payments.

That does not create an automatic right to switch lender, nor does it remove underwriting altogether.

It does mean that some borrowers who fail a lender’s standard affordability calculation may have more options than they realise.

A Changed Income Does Not Necessarily Mean the Borrower Is Trapped

Mortgage affordability is normally assessed using a detailed calculation of income, expenditure, credit commitments, dependants and the proposed mortgage term.

That assessment is designed to establish whether the borrower can maintain the mortgage both now and under foreseeable future conditions.

However, a borrower’s financial circumstances can change substantially during the life of a mortgage.

A salaried employee may become self-employed. A business owner may reduce salary and dividends while retaining profit within a company. A borrower may move into retirement, reduce working hours or experience a temporary decline in income.

Others may have taken on childcare costs, personal loans or credit commitments since the mortgage was originally arranged.

These changes can create an unusual position.

The borrower may have maintained every payment on the existing mortgage, including through periods of higher interest rates, but still fail the standard affordability assessment required by a prospective new lender.

Historically, that could leave the customer with a limited choice between accepting a product transfer from the existing lender or moving onto its standard variable rate.

Modified affordability assessments are intended to reduce that form of mortgage lock-in where the proposed new arrangement is demonstrably more affordable and the borrower is not seeking to increase the debt materially.

The FCA Changes Widened the Comparison

Modified affordability rules are not entirely new.

The FCA originally amended its responsible-lending framework in 2019 to help customers who were maintaining their existing mortgages but could not pass the affordability requirements needed to access a cheaper product. The regulator identified that some consumers were paying higher mortgage costs than necessary because the rules were preventing them from switching.

The important 2025 change broadened how the comparison could operate.

A new lender can now consider whether its proposed mortgage is more affordable than either the customer’s existing mortgage or a new deal that the current lender has indicated is available.

The FCA said the changes were intended to support consumer choice, encourage competition and make it easier for borrowers to access more affordable remortgage products.

The comparison is not confined to the headline interest rate.

The rules consider the aggregate cost of relevant monthly payments and applicable product, arrangement and intermediary fees during the introductory or comparison period.

This prevents a nominally lower rate from being treated as more affordable where substantial fees make the overall arrangement more expensive.

The proposed mortgage must also be on sufficiently similar terms. A borrower cannot generally use modified affordability simply to increase the loan significantly, introduce materially greater risk or make an unrelated change to the mortgage structure.

Payment History Has Become More Valuable Evidence

The principle behind modified affordability is straightforward.

A borrower who has consistently paid a more expensive mortgage may have provided meaningful evidence that they can afford a lower-cost replacement.

The FCA’s rules permit lenders to take account of the fact that the customer is not in payment shortfall and that the proposed mortgage is more affordable than the existing arrangement or the alternative offered by the current lender.

The regulator’s guidance states that a customer who has demonstrated an ability to afford a higher monthly payment may be treated as likely to afford the lower payment under the proposed mortgage.

This does not mean payment history overrides every other consideration.

A lender may still investigate the borrower’s financial circumstances and apply its own responsible-lending policy. It may review the credit record, mortgage conduct, remaining term, property value and other debts.

However, the assessment can be more tailored and risk-sensitive than a standard application that treats the borrower as though they had no established repayment history.

For customers whose circumstances do not fit a conventional model, that distinction can be decisive.

External Remortgages Are Replacing Product Transfers in MAA Cases

Stonebridge’s latest figures show a striking change in the way modified affordability is being used.

In the first quarter of 2025, product transfers represented 12.3% of mortgages completed under the modified rules. By the first quarter of 2026, that share had fallen to just 1.7%.

At the same time, the total number of modified-affordability remortgages increased.

The shift suggests advisers and lenders are increasingly using the rules to support genuine movement between providers rather than simply keeping customers with their incumbent bank or building society.

That matters because a product transfer is not necessarily the strongest available outcome.

Remaining with the existing lender can be quick and convenient. It may involve limited underwriting, no new valuation and reduced legal work.

For many clients, it will remain appropriate.

But convenience should not be confused with competitiveness.

Another lender may offer a lower rate, a more suitable fixed period, greater repayment flexibility or terms that better reflect the borrower’s future plans.

The Stonebridge data indicates that modified affordability is beginning to make those external options available to borrowers who might previously have been excluded before a full comparison was undertaken.

Borrowers Using the Rules Are Securing Larger Loans at Lower Rates

The borrowers remortgaging externally under modified affordability were not limited to small mortgage balances.

According to data obtained by Stonebridge through a Freedom of Information request, the average external modified-affordability remortgage during the first quarter of 2026 was £194,999, representing an annual increase of 141%.

The average interest rate on those mortgages was 3.92%, 0.73 percentage points lower than a year earlier.

This suggests the rules are being used across meaningful mortgage balances rather than only for a narrow group of customers with small residual loans.

A difference of less than one percentage point can have a material effect on the monthly cost of a mortgage approaching £200,000.

The actual saving will depend on the term, repayment basis, fees and product structure, but the figures demonstrate why checking the wider market can matter.

A borrower who assumes that only the existing lender will consider the case may remain on a more expensive arrangement for several years.

Self-Employed Borrowers May Be Among the Main Beneficiaries

Modified affordability may be particularly useful for borrowers whose income is genuine and sustainable but difficult to present through conventional underwriting.

A newly self-employed professional may have only one year of accounts. A company director may have changed remuneration strategy or retained more profit within the business.

An entrepreneur who recently established a new company may temporarily report lower taxable income despite maintaining substantial cash reserves and an established payment history.

Rob Clifford, chief executive of Stonebridge, noted that the rules are relevant not only to traditional mortgage prisoners but also to entrepreneurs who struggle with underwriting after starting a business, despite having paid their mortgage successfully for years.

Standard affordability rules often rely heavily on documented current income.

Modified assessments can allow the lender to place greater weight on the existing mortgage performance where the replacement is more affordable and the wider circumstances remain acceptable.

That does not guarantee acceptance.

Some lenders may still require minimum trading periods, evidence of future income or additional documentation. The availability of modified affordability also depends on whether the lender has chosen to implement the rules within its own lending policy.

The regulatory permission creates an option; it does not compel every lender to use it.

Older Borrowers May Have More Remortgage Routes Than Expected

Borrowers approaching or already in retirement can encounter similar difficulties.

Their employment income may have reduced, while pension income may not support the required loan under a standard calculation. The proposed mortgage term may also extend beyond the lender’s conventional maximum age.

Yet the borrower may have maintained the existing loan comfortably and possess substantial equity within the property.

A modified affordability assessment could potentially support a conventional remortgage where the new monthly cost is lower and the terms remain appropriate.

Other alternatives may include a retirement interest-only mortgage, a specialist later-life mortgage or, where suitable, equity release.

The existence of these options makes it important to review the whole later-life lending market rather than accepting a product transfer solely because the borrower has retired.

Age, payment history, pension income, loan-to-value and the proposed mortgage term will all affect the outcome.

Where a longer term is used to reduce payments, the total interest cost must also be considered.

The FCA requires firms to warn customers that extending the mortgage term may mean paying more over the life of the loan, even if the immediate monthly payment is lower.

A Lower Monthly Payment Can Still Carry Long-Term Trade-Offs

Modified affordability focuses on whether the proposed mortgage is more affordable, but lower immediate payments do not automatically make a product the best overall choice.

A borrower may achieve a reduced payment by extending the term.

For example, moving a remaining balance from a 12-year term to a 20-year term could improve monthly affordability but increase the total interest paid and extend the debt further into retirement.

A new lender may also offer a lower initial rate alongside a product fee that reduces the overall benefit.

Some products carry early repayment charges that may be unsuitable if the borrower intends to move home, sell the property or repay the loan early.

The adviser must therefore examine both monthly affordability and total cost.

The objective should not be merely to pass an assessment. It should be to find an arrangement that remains suitable throughout the expected period of ownership.

Payment Problems May Prevent the Rules From Applying

Modified affordability is principally designed for borrowers who have demonstrated that they can maintain their existing mortgage.

Customers in arrears or payment shortfall may not meet the relevant conditions.

Recent missed mortgage payments, significant unsecured arrears or other evidence of financial stress could also affect the lender’s willingness to proceed.

Borrowers experiencing payment difficulty should contact their lender as early as possible rather than assuming a remortgage will solve the problem.

The lender may be able to offer temporary support, payment arrangements, term changes or other assistance under its obligations to customers in financial difficulty.

Modified affordability should not be presented as a method of bypassing genuine repayment concerns.

Its purpose is to prevent otherwise sustainable borrowers from being excluded solely because a standard assessment does not recognise their established payment performance.

Capital Raising Will Usually Require a Different Assessment

The rules are most relevant where the borrower is replacing an existing mortgage on broadly similar terms.

A customer wishing to raise a significant additional sum may require a full affordability assessment for the increased borrowing.

This matters because many remortgage enquiries include a request for capital to fund home improvements, consolidate debt, assist family members or purchase another property.

A borrower may qualify to move the existing balance under modified affordability but be unable to raise the full additional amount requested.

In some cases, the transaction may be divided conceptually between replacement borrowing and new borrowing, although lender policy will determine whether that is possible.

Clients should therefore distinguish between switching an existing mortgage and increasing it.

A strong payment history can support the case, but it does not establish that new debt is affordable.

Interest-Only Borrowers Still Need a Credible Repayment Strategy

Some borrowers approaching remortgage have an interest-only mortgage.

The lower monthly payments may appear affordable, but the outstanding capital still needs to be repaid at the end of the term.

A modified affordability assessment does not remove the requirement for an acceptable repayment strategy where the proposed mortgage remains interest-only.

The lender may consider investments, pensions, property sales or other assets, depending on its policy.

Borrowers whose original repayment strategy has underperformed may need to consider a partial conversion to capital repayment, a term extension, sale of the property or another later-life solution.

Moving to a cheaper interest-only product can reduce immediate costs, but it should not postpone an unresolved capital shortfall without a realistic plan.

Product Transfers Should Be Compared, Not Automatically Rejected

The sharp decline in modified affordability being used for product transfers does not mean remaining with the current lender is inherently poor advice.

A product transfer may still provide the best combination of rate, cost, speed and certainty.

The existing lender may not require legal work or a physical valuation. There may be no need to supply detailed income evidence, and the switch can often be completed with less administration.

That can be particularly valuable where the mortgage balance is small or the difference between products is limited.

The point is that a product transfer should be an informed choice rather than a default assumption.

A borrower who cannot pass one lender’s standard affordability calculator should not conclude that the existing provider is the only option before modified-affordability and specialist remortgage routes have been considered.

The Remortgage Market Is Becoming More Important in 2026

The increase in modified-affordability lending is taking place during a period of substantial refinancing activity.

Stonebridge reported that remortgage applications increased by 45.8% year-on-year during the first quarter of 2026 as borrowers continued to reach the end of low-rate mortgage products arranged during the pandemic. It cited UK Finance figures indicating that approximately 1.8 million fixed-rate mortgages are due to end during 2026.

Activity softened in the second quarter as borrowing costs increased, with remortgage applications falling from the exceptionally strong first-quarter level. However, large numbers of borrowers are still expected to review their mortgages during the remainder of the year.

For customers moving from an unusually low fixed rate, the new mortgage may still cost more than the expiring product.

The relevant modified-affordability comparison may instead be with the lender’s reversion rate or the new product offered by the existing provider.

This is an important distinction.

The rules do not necessarily require the replacement mortgage to be cheaper than the historic fixed rate that is ending. They are designed to help the customer access a more affordable available outcome than remaining on the existing arrangement or accepting the incumbent lender’s indicated alternative, subject to the applicable conditions.

Lender Adoption Remains Uneven

Although usage has increased, modified affordability is not universally available.

Earlier Stonebridge analysis showed that the number of lenders using the rules increased from eight to 12 following the FCA changes. External remortgages completed under modified affordability rose 126% during the second half of 2025 compared with the same period a year earlier.

That represents progress, but it remains a relatively small part of the overall mortgage market.

Lenders retain discretion over whether and how they use the modified framework. Each must reflect its approach within its responsible-lending policy.

A borrower cannot therefore simply request a modified assessment from every bank and expect the same result.

The adviser needs to identify lenders that are actively using the rules, understand the relevant conditions and present the case with the necessary payment-history and product-comparison evidence.

This is a live criteria issue, not merely a regulatory entitlement.

Advice Matters Because Eligibility Is Highly Specific

Modified affordability is a technical route designed for a defined category of remortgage.

It is not a general relaxation of mortgage underwriting.

The borrower’s existing payment record, proposed loan amount, mortgage term, interest rate, fees and current lender’s alternative all influence whether the conditions are met.

A case that qualifies with one product may cease to qualify if the rate or fees change.

The availability of a cheaper product is also only one element of suitability. The adviser must consider repayment method, term, future plans, early repayment charges and any changes to the borrower’s circumstances.

This is why borrowers should seek advice before assuming they must accept their existing lender’s product transfer.

The most appropriate outcome may still be to remain with the current provider. It may instead be an external remortgage completed under standard affordability, a modified assessment or a specialist lending route.

The point is to establish the answer through current research rather than assumption.

A Failed Standard Affordability Test May No Longer End the Search

Stonebridge’s latest analysis provides evidence that modified affordability is beginning to fulfil its intended purpose.

More borrowers are moving between lenders, external cases now account for almost all mortgages completed under the rules, and the use of modified assessments simply to retain customers through product transfers has fallen dramatically.

For borrowers who have maintained their mortgage but experienced a change in income, employment, age or household circumstances, that creates an important message.

Failing a standard affordability calculation does not necessarily mean the only option is to stay with the existing lender.

It may still be possible to move where the new mortgage is more affordable, the borrowing remains broadly comparable and the borrower has demonstrated a reliable payment history.

The rules are not a guarantee, and lender adoption remains limited.

But they provide a strong reason to review the market before accepting that a product transfer is the only available route.