The Financial Conduct Authority (FCA) has launched a major review of mortgage rules aimed at making home ownership more accessible. It’s a significant development for mortgage advisers. Whether you’re newly qualified or well-established, the proposed changes could affect how you assess clients, offer advice and structure recommendations
In this article, we’ll break down the key points from the Mortgage Rule Review (MRR), what the FCA is consulting on, and what it means in practice for your work with clients, including first-time buyers, later-life borrowers and those in more complex financial situations.
What Is the Mortgage Rule Review?
The FCA’s Mortgage Rule Review is part of a wider plan to remove unnecessary barriers in the market. The main document, DP25/2, outlines possible changes to affordability assessments, lending rules and advice frameworks. There’s also CP25/11, which contains near-term proposals for mortgage flexibility.
The consultation is open until 19 September 2025. It’s an early stage, but mortgage professionals are encouraged to give feedback now before any regulatory shifts become permanent.
The FCA says its aim is to rebalance risk, improve access to suitable lending and support economic growth. That means lenders and advisers may soon have more flexibility—but also more responsibility.
Core Areas Under Review
Affordability and Stress Testing
Current stress-testing rules often limit access for people who can afford monthly payments but fail theoretical tests. The FCA is asking whether it’s time to rethink these methods.
One option is to allow rent-based affordability checks, especially for first-time buyers who’ve proven they can manage similar payments already. Another proposal is to move away from applying a fixed 3% stress buffer on top of reversionary rates.
The review also invites debate on whether lenders should use centralised stress rates, or have more freedom to apply discretion based on customer profiles.
Interest-Only and Shared Ownership Mortgages
The regulator is reviewing whether interest-only products could play a larger role—particularly in cases where borrowers have clear repayment strategies. There’s also a push to revisit part-and-part loans and improve the way shared ownership affordability is assessed.
These areas have been historically underserved, but the FCA believes they may help more people access secure housing if properly structured.
Later-Life Lending
An ageing population and rising homeownership among older borrowers has triggered calls for more flexibility in later-life lending.
The FCA is exploring whether standard affordability rules make sense for retirement-interest-only (RIO) and equity release products. One possible change is simplifying how income is assessed in retirement, especially where pension drawdowns or investments are involved.
Some form of regulated advice may become compulsory in these scenarios, with greater expectations placed on advisers to guide clients through later-life choices.
Vulnerable Borrowers and Joint Applications
The review highlights how strict interpretations of affordability can make it harder for victims of financial abuse or people leaving joint mortgages to move on. Principles-based approaches may allow for more personal judgement in assessing affordability in these cases.
Simplifying application processes for joint and single-income households could also support a broader range of clients.
Changes to Mortgage Products and Terms
A related consultation, CP25/11, looks at short-term reforms. These include proposals to:
- Remove full affordability checks on certain product transfers, where there’s no increase in borrowing
- Allow easier term reductions without fresh income verification
- Permit early contact between lenders and borrowers before formal advice kicks in
The FCA says this could save time and reduce friction—especially for existing borrowers making minor adjustments.
Regulatory Risk Appetite
Underlying these proposals is a broader shift in tone. The FCA is openly questioning whether its approach has become too risk-averse.
This includes a re-evaluation of the Mortgage Charter, which was introduced during the cost-of-living crisis to protect homeowners from repossession. While well-intentioned, the FCA is concerned that such measures may now distort lending decisions and dampen competition.
Impacts and Opportunities for Mortgage Advisers
Supporting First-Time Buyers
Relaxing stress testing and expanding shared ownership routes could mean more options for clients on the margins of affordability. As an adviser, you’ll play a key role in helping first-time buyers understand the risks and benefits of these products.
Being alert to small shifts in policy and lender appetite will help you spot opportunities others miss.
Simpler Product Transfers and Remortgaging
The proposed changes around affordability checks mean existing clients may soon find it easier to switch products or reduce their term without jumping through new hoops.
You can help them navigate these changes efficiently, ensuring they don’t miss out on better deals due to red tape.
Growth in Later-Life Advice
The FCA’s focus on later-life lending presents a potential growth area. Advisers who understand RIOs, lifetime mortgages and flexible retirement income streams will be better placed to serve this expanding client base.
There may also be new training requirements, depending on how far the FCA pushes regulated advice in this space.
Working with Vulnerable or Non-Traditional Clients
The review supports greater flexibility for people in less typical circumstances—self-employed, single-income households, or those with non-salary income. Advisers with strong case-building skills and knowledge of niche lending will be well-positioned to help.
Risks and Considerations
Of course, loosening rules carries risks.
Wider use of interest-only or shared ownership mortgages could result in repayment problems if the advice or borrower plans are not robust. Advisers must stay vigilant and clear about risks, especially where clients are pushing affordability boundaries.
Also, if the Mortgage Charter is scrapped, borrower protections could weaken—meaning advisers need to step up efforts to explain repayment consequences and fallback plans clearly.
What Advisers Should Do Now
- Review the consultation papers: Read DP25/2 and CP25/11 to understand what’s being proposed
- Give feedback: The consultation runs until 19 September. Input from front-line advisers is valuable
- Upskill: Interest-only lending, RIOs, shared ownership and vulnerability support may all require specialist knowledge
- Educate your clients: Keep clients informed of potential changes and how they might affect their mortgage choices
- Watch for lender responses: Some changes may be trialled or adopted early by lenders looking to gain competitive edge
Conclusion & Next Steps
The FCA’s Mortgage Rule Review signals a willingness to change. For advisers, that means both opportunities and challenges.
Greater flexibility could unlock access for many clients, but it will also require sharper judgement, closer attention to affordability and possibly extra qualifications.
Now is the time to stay informed, take part in the consultation and consider how your advice practices may need to evolve.
Futuretrend will continue to support advisers preparing for a changing market through focused CeMAP training, ongoing CPD and access to updates as the consultation progresses.