Recent regulatory changes have introduced new rules regarding Buy Now, Pay Later (BNPL) services like Klarna, impacting how they are viewed in mortgage applications. As of 15 July 2026, these services are now regulated by the Financial Conduct Authority (FCA), which means lenders will consider BNPL usage more seriously when assessing mortgage applications. Understanding these changes is important for potential borrowers.
What are the new rules for BNPL services?
As of mid-July 2026, new regulations have come into effect that bring many interest-free BNPL agreements under FCA oversight. This includes credit provided by third-party companies that must be repaid in 12 instalments or less. However, credit offered directly by retailers may not fall under these regulations, and agreements made before the new rules remain unaffected. Key changes include:
- The right to lodge complaints with the Financial Ombudsman Service if issues arise.
- Enhanced protection for consumers when purchases go awry, allowing claims against lenders under Section 75 for faulty goods or retailer insolvency.
- Mandatory reporting of BNPL usage to credit reference agencies.
How does using Klarna impact mortgage applications?
Using Klarna or other BNPL services does not outright disqualify you from obtaining a mortgage. However, lenders may scrutinise your financial behaviour more closely if they see multiple BNPL payments alongside other debts, such as credit cards or overdrafts. Even if a BNPL agreement is not reflected in your credit report, the payments could still appear on your bank statements, influencing the lender’s affordability assessment.
Should I clear my Klarna balance before applying for a mortgage?
While clearing any outstanding Klarna balance may lower your monthly financial commitments, it’s advisable to consult with a mortgage broker before making any financial moves, especially if it involves your deposit savings. Your broker will need a comprehensive understanding of your financial situation, including:
- The total outstanding balance on your Klarna account.
- Your monthly repayment obligations.
- Any missed payments.
- The timeline for full repayment of the agreements.
It’s essential to disclose all BNPL commitments when applying for a mortgage, as lenders will consider these as part of your overall financial picture.
What this means for potential borrowers
For borrowers considering a mortgage application, the new regulations mean that transparency regarding BNPL usage is more critical than ever. Being upfront about any Klarna commitments can help avoid complications during the mortgage approval process. As lenders adapt to these changes, it’s wise to seek advice from a mortgage broker who can guide you through the implications of your financial habits and help you present the best case for your mortgage application.
Frequently asked questions
Will using Klarna definitely stop me from getting a mortgage?
No, using Klarna does not automatically prevent you from obtaining a mortgage. However, lenders may scrutinise your overall financial situation more closely if they see multiple BNPL transactions alongside other debts.
What should I do if I have outstanding Klarna payments before applying for a mortgage?
It’s advisable to consult with a mortgage broker before clearing any outstanding Klarna payments. They can help you understand how these commitments will impact your mortgage application and guide you on the best course of action.
