Mortgage Rules in Transition

Unknown Speaker

Hello and welcome back to the B-Compliant Podcast! I’m Vicky Pearce, and as always, I’m joined by the ever-sparkly Rachel MacRae. Rachel, how’s your week been?

Rachel MacRae

Oh, Vicky, it’s been a whirlwind! I’ve been knee-deep in mortgage files, so this week’s topic is right up my street. And I’ve got to say, I’m actually excited about this FCA discussion paper—DP25/2. It feels like we’re on the cusp of some real change.

Unknown Speaker

Yeah, it’s a big one. The FCA’s basically asking, “Are our mortgage rules still fit for purpose?” And the bit that jumped out at me was the whole thing about affordability assessments. They’re talking about maybe scrapping the old stress test and moving to a centralised rate, or even using product-based models. That’s a big shift, isn’t it?

Rachel MacRae

It is! And, you know, the idea of using rental history as a standalone indicator for affordability—I mean, that’s massive for first-time buyers. If you’ve been paying rent reliably for years, why shouldn’t that count for something? It’s almost common sense, but it’s never been part of the formal criteria before.

Unknown Speaker

Exactly. I’ve had so many clients over the years who could easily afford a mortgage, but the stress test tripped them up. Especially when rates are volatile, it can feel a bit arbitrary. But then, I do worry—if we make it too flexible, are we just opening the door to riskier lending again? We’ve all seen what happens when affordability checks get too loose.

Rachel MacRae

That’s the thing, isn’t it? There’s always that balance between helping people onto the ladder and making sure we don’t end up with a repeat of, well, 2008. But I do think the FCA’s being quite thoughtful here—they’re not saying “let’s throw out the rulebook,” just, “let’s make sure it’s actually working for real people.”

Unknown Speaker

Yeah, and they’re also looking at things like career trajectory and professional status. So, if you’re a newly qualified doctor, for example, your future earnings might justify a bigger loan, even if your current payslip doesn’t. That’s a bit more nuanced than the old tick-box approach.

Rachel MacRae

I love that. It’s a bit like what we talked about in Episode 4, when we discussed how some firms use really basic suitability assessments and miss the bigger picture. This feels like a step towards more personalised, fairer lending decisions.

Unknown Speaker

Definitely. But advisers and lenders are going to have to get their heads around new processes if these changes come in. More flexibility means more judgement calls, and that can be tricky from a compliance perspective. I can already hear the compliance teams groaning!

Rachel MacRae

Oh, absolutely. And you know, with more discretion comes more responsibility. But if it means better outcomes for clients, I think it’s worth the effort. Shall we talk about later-life lending? Because that’s another area the FCA’s really digging into.

Rachel MacRae

So, the paper’s really clear—there’s a growing trend of people borrowing into retirement, and products like RIOs and lifetime mortgages are just not being used as much as they could be. I see this all the time. Clients want to unlock equity, but they’re put off by the complexity or the stigma around these products.

Unknown Speaker

Yeah, and sometimes it’s the regulation itself that gets in the way. The FCA’s asking whether the current rules are actually stopping innovation or making it harder for people to access the right products. I mean, we’ve got all these options, but if the advice process is too rigid, people just don’t get the help they need.

Rachel MacRae

Exactly. And the paper calls for more holistic advice—so not just looking at the mortgage in isolation, but the client’s whole financial picture. That’s something we’ve been banging on about for ages, isn’t it? Especially as people approach retirement, you can’t just look at the loan—you’ve got to think about pensions, care costs, all of it.

Unknown Speaker

Yeah, and I think there’s a real opportunity here for advisers to step up and offer that joined-up guidance. But it does mean we need the rules to support us, not tie our hands. I mean, sometimes you feel like you’re spending more time ticking boxes than actually helping the client.

Rachel MacRae

Totally. And the FCA’s also asking about whether the sales and disclosure rules are actually helping people understand their options, or just making things more confusing. I’ve had clients glaze over when I start talking about MCOB disclosures. Maybe it’s time for a rethink there too.

Unknown Speaker

Yeah, and it’s not just about older borrowers. The paper also touches on vulnerable customers—like people stuck in joint mortgages after economic abuse. The current rules don’t always give lenders enough flexibility to help those clients. It’s a tough one, but I’m glad the FCA’s at least asking the question.

Rachel MacRae

And don’t forget climate change! The FCA’s saying, look, we can’t solve the environmental crisis with mortgage rules, but we do need to think about how things like property insurability and flood risk are going to affect lending decisions. It’s all getting a bit more complicated, isn’t it?

Unknown Speaker

It is, but I think it’s good that they’re looking at the bigger picture. The market’s changing, and the rules need to keep up. Speaking of rules, should we get into the compliance side? There’s been some big news on reporting requirements this week.

Unknown Speaker

Right, so the FCA’s just confirmed they’re scrapping a load of old reporting requirements—FSA039, RMA-F, Form G—all going from June next year. That’s a lot of admin off the table for firms, and honestly, I think most people will be relieved.

Unknown Speaker

The FCA’s saying this is part of their move to be a more data-driven, proportionate regulator. They want firms to focus on higher-value compliance, not just ticking boxes for the sake of it. But—there’s always a but—a few people are worried that without those regular returns, some firms might miss important notifications, especially around close links and controllers.

Rachel MacRae

That’s a fair point. I mean, if you’re used to getting a reminder every quarter, it’s easy to forget when you’re supposed to notify the FCA about something. But they’re talking about using My FCA alerts instead, aren’t they? So hopefully that’ll plug the gap.

Unknown Speaker

Yeah, and just to be clear, the underlying obligations haven’t gone away. Firms still have to notify under SUP 11 and SUP 15, and Principle 11 is still there—be open and cooperative. It’s just the admin that’s changing, not the actual rules.

Rachel MacRae

And it’s not just the FCA making moves. The Consumer Duty Alliance has launched this new Data Forum to help advice firms get to grips with all the data-driven stuff. I think that’s a good sign—firms are going to need more support as the regulator leans harder on data to evidence good outcomes.

Unknown Speaker

Yeah, and as we’ve seen in previous episodes, like when we talked about the Section 165 data requests, the FCA’s not slowing down on this. If anything, they’re ramping up. So, it’s more important than ever for firms to keep their processes up to date and not get caught out by old habits.

Rachel MacRae

Absolutely. And if you’re listening and you’ve got a horror story about outdated reporting tripping you up, you’re not alone! Hopefully, these changes will make life a bit easier for everyone.

Unknown Speaker

Right, I think that’s a good place to wrap up. There’s a lot happening in mortgage regulation, and it feels like we’re at the start of a new chapter—no pun intended. We’ll be keeping an eye on how these proposals develop, so stay tuned for more updates.

Rachel MacRae

Thanks for joining us, everyone! Vicky, always a pleasure. See you next time?

Unknown Speaker

Always, Rachel. Take care, everyone, and bye for now!