Fire rated downlights help to prevent the spread of fire and minimise the risk of structural damage/collapse. When a recessed downlight is installed, a hole is cut into the ceiling. This hole reduces the ceiling’s natural ability to act as a barrier. Fire rated downlights are used to restore the natural fire integrity of a ceiling.
In the event of a fire, the intumescent material in a fire rated downlight melts or swells up and seals off the hole. This prevents the fire from spreading through the hole and onto adjoining floors, but more importantly protects the building’s structure.
The structure of most houses is made from wooden ceiling joists, once the ceiling joists are on fire they will inevitably collapse. This could cause the entire building to collapse before anyone has had time to extinguish the fire (fire service) or escape to safety.
If they're being installed into houses containing wooden ceiling joists then they should be fire rated. If the ceiling or structure is made from concrete then they may not need to be fire rated.
They also provide added protection such as acoustic protection and moisture resistance. Non fire rated downlights are a gateway that will allow sound, air, moisture and fire to pass through unchallenged.
The ESC (Electrical Safety Council) recommends fire rated downlights for all domestic installations. More further information available here.
Part B of the Building Regulations covers fire safety, click on the image below to read the official guidelines for domestic use here at the official Government website.
If in doubt, install fire rated downlights anyway, they might cost slightly more but are safer and provide peace of mind.