"We could go even further and, with Government support, reduce costs of anti-money laundering measures, relaxing know your customer requirements on small transactions."
- Nikhil Rathi, chief executive of the FCA
The FCA has responded to government calls for regulators to support growth in the mortgage market, outlining a series of regulatory changes it plans to introduce in 2025.
In a letter to Prime Minister, Chancellor, and Secretary of State, FCA chief executive Nikhil Rathi said the regulator is "already working to remove unnecessary regulation and reduce how much data some firms must provide".
This year, the FCA also planned to streamline its handbook, reduce reporting burdens for firms, and make the Senior Managers and Certification Regime more flexible.
However, Rathi has now revealed that the FCA will "go further", beginning to simplify responsible lending and advice rules for mortgages, "supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults".
The FCA will also consult on removing maturing interest-only mortgage and other outdated guidance, and work with the government to remove overlapping standards, e.g. the Mortgage Charter.
The regulator also plans to remove the need for a Consumer Duty Board Champion now the Duty is in effect and ensure future consultations on consumer protection ask if the Consumer Duty is sufficient rather than new rules.
It also plans to review the proportionality of reporting requirements and remove redundant returns, initially expected to benefit 16,000 firms.
In his letter, Rathi said: "We could go even further and, with Government support, reduce costs of anti-money laundering measures, relaxing know your customer requirements on small transactions. The Treasury also commenced modernisation of the Consumer Credit Act in 2022. If accelerated, we could reduce burdens further and faster."
In the letter, Rathi added that the FCA wants to make it "easier for firms to start up and grow" by improving the process and speed to authorise a firm.
He said: "We already intended to do more to digitise our authorisations process to reduce timescales and cost and we will go further".
The FCA plans to:
• Provide a dedicated case officer to every firm in its regulatory sandbox.
• Support more early and high growth firms, with 50% more dedicated supervisors.
• Extend pre-application support to all wholesale, payments and crypto firms.
• Indicate more frequently that it is ‘minded to approve’ promising start-ups to help them secure funding.
Rathi added: "Some innovative start-ups find it hard to meet all the threshold conditions immediately and therefore don't secure our approval to operate. We want to work with the Treasury to create a legislative framework that enables relevant firms to conduct limited regulated activities with streamlined conditions."
Rightmove’s mortgage expert, Matt Smith, commented: "It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like. Regulatory change is what we've been calling for, as that is what is needed to truly impact home-mover affordability, particularly for first-time buyers. We've seen some innovative products and schemes announced by lenders to try and do their bit to support home-buyers, but they need support from both the government and regulators to really drive more options for people."
Elliot Reader, senior vice president in Houlihan Lokey’s fintech group, said: "Improving accessibility to the housing market through the relaxation of mortgage rules could be a game-changer for first-time buyers, especially as affordability has been a significant, long-standing issue. The proposed changes to affordability and stress-testing rules could open up opportunities for more buyers by allowing them to borrow more, particularly those with smaller deposits. However, while these adjustments may make it easier for some buyers to access mortgages, they don’t directly address the broader problem of supply. The real challenge is whether these measures will be enough to offset high house prices and ongoing supply shortages. Simply lowering lending criteria will help some buyers, but without concurrent efforts to boost supply, the broader affordability challenge could remain unsolved."
