Emma RadmoreThe FCA has published its Regulatory Priorities report for mortgages. Its key priorities will be:
- to improve consumer outcomes under the Mortgage Rule Review by simplifying its rules, so as to enable firms to innovate and customers to borrow while protecting vulnerable customers. As it has already done, it plans that most of the changes will be permissive, so that firms can choose how much flexibility to build into their risk appetites;
- to encourage responsible lending and support mortgage borrowers in financial difficulty by monitoring their affordability assessments, especially when broadening their offerings;
- to ensure lenders and intermediaries recommend products that are suitable for consumers’ needs.
It expects firms to engage with its reviews, including the recent review on second charge mortgages. As well as developing these themes, it will look at:
- how to improve resilience to minimise disorderly failure of mortgage firms;
- identifying outlier firms whose fraud controls are not as strong as they should be;
- looking at incentives and conflicts within the market, especially examining “conditional selling” arrangements where estate agents require consumers to use particular brokers;
- use of appointed representatives and their monitoring;
- operational resilience – the FCA notes it will be finalising its rules on reporting operational third party incidents and material third party contracts;
- SMCR changes; and
- use of AI – it will encourage firms in the sector to experiment and innovate while having in mind the Consumer Duty.
By the end of the year, we will see final rules on LTI, responsible lending and later life mortgages, with other initiatives going into 2027.