In an action plan released today, the FCA has outlined proposals to review its expectations for mortgages and lending.
The proposals are part of its work to streamline rules, reduce burdens on businesses, and improve outcomes for consumers following the introduction of Consumer Duty.
Although the FCA says there are no plans for 'wholesale changes' of its rules, it has announced a series of plans to streamline regulations and confirmed the timeline for mortgage rule changes.
In a statement released today, the FCA said: "There was clear feedback to our call for input that now is not the time for wholesale changes to our rules. We will continue to engage with industry and others to get the balance right, without a widespread overhaul.
"We have identified targeted steps to amend or simplify discrete areas of our rules. Most respondents supported simplification of our requirements in principle, but opinions varied on the approach and timeline. The majority did not want a wholesale review of our Handbook but encouraged steps to amend or simplify it in discrete areas."
The FCA's plans
The FCA says its proposals will make it easier to navigate regulations for consumer finance, investment and mortgages firms by retiring more than 100 pages of outdated guidance.
The 'outdated' guidance it plans to retire spans the mortgage and consumer finance sectors, as well as guidance related to the Treating Customers Fairly initiative.
The regulator will also review current prescriptive disclosure rules to give firms more flexibility to tailor communications to customers' needs and preferences, like online and digital transactions.
It will also revisit rules for businesses with customers outside the UK, for example looking at whether insurance firms need to apply UK rules for their overseas customers.
In addition, the FCA will review parts of its credit advertising rules, such as lengthy terms and conditions.
Guidance for smaller firms
The regulator has heard from smaller firms that they would like further support in implementing outcomes-focused regulation and would like dedicated guides to understand the FCA's requirements.
The FCA says it is "mindful that sector-specific guides can create difficulties in that a one-size-fits-all approach is not always appropriate" but recognises the request and will pilot an approach for small firm guides in 2025. It will then consider whether it is appropriate to roll this out more broadly.
Mortgage rule changes
The FCA has confirmed that it will publish a consultation paper and discussion paper on mortgage changes in May and June 2025.
The regulator first announced plans to simplify mortgage lending and advice rules in January this year, with its chief executive saying the changes would "support home ownership and opening a discussion on the balance between access to lending and levels of defaults".
Today, the FCA confirmed that it has already started reviewing its responsible lending and advice rules for mortgages. This includes looking to simplify its requirements and updating or removing detailed and prescriptive requirements now covered by the Duty.
In May, it will consult on proposals to make it easier for consumers to remortgage with a new lender, reduce their overall borrowing costs through term reductions, and discuss their options with a firm outside a regulated advice process.
Its June discussion paper will cover topics such as risk appetite and responsible risk-taking, alternative affordability testing and product innovation, lending into later life, and consumer information needs.
Sarah Pritchard, executive director of supervision, policy, competition and international at the FCA, said: "Now the Consumer Duty is in full force we’re making changes quickly where stakeholders want us to, to cut unnecessary costs, support growth, and ultimately help consumers get better outcomes.
"These proposals are part of our long-term efforts to future-proof our rules, reduce burdens for financial firms and will help the ambitious government targets to cut the cost of regulation."
