The Financial Conduct Authority’s discussion paper DP25/2 has sparked much debate about the future of the mortgage market. At IMLA, we welcome the regulator’s recognition that the time is right to take stock of the current framework and consider how best to support the shared goal of increasing access to homeownership, the benefits of which are well-documented. Owning a home provides security, stability, and the opportunity to build long-term wealth while also fuelling growth across many sectors of the economy. Regulatory adjustments that can safely remove unnecessary barriers to responsible borrowing are therefore to be applauded.
The recent relaxation of the loan-to-income flow limit is one such example, allowing lenders to help more households without compromising the robust affordability rules already enshrined in MCOB.
However, while proportionate reform is both welcome and overdue, we must guard against the temptation to go further than is necessary. The government has made no secret of its wish to reduce the role of regulators more broadly to boost economic growth. There is a concern that the FCA’s longer term plan for financial services may be a reaction to this change in attitude, which could evolve into a root-and-branch overhaul of the mortgage market. That would risk change for its own sake – designed to demonstrate regulatory purpose – rather than targeted adjustments designed to improve consumer outcomes.
One area of particular concern is the suggestion that the role of the mortgage adviser could be diluted. Advice remains central to good consumer outcomes. Around 90% of borrowers already choose the advised route, and with good reason: the mortgage market can be complex and offers a huge variety of consumer choice, and borrowers cannot be expected to navigate it unaided. Removing or reducing the requirement for advice would not empower consumers, rather it would expose them to the very risks the Mortgage Market Review was designed to avoid.
Equally, the regulator should take care not to push the market in directions that are neither demanded by consumers nor suited to the UK’s mortgage landscape. For example, encouraging borrowers to rely too heavily on AI-driven tools at the expense of human advice risks alienating consumers and undermining trust. Likewise, attempts to promote long-term fixed rates – which have never gained traction in the UK – would be unlikely to succeed and could burden borrowers with inflexible, costly products. In the later life market, rather than adding layers of regulation, what is needed are simpler, clearer processes for referring customers to the right specialists. This is a complex area requiring expertise, and borrowers will always be best served by advisers with the right knowledge and experience, supported by efficient referral pathways.
Instead, the focus should be on removing unnecessary barriers to responsible lending and widening access where it can make the most difference. That means continuing to allow flexibility around loan-to-income limits and ensuring that lenders are free to apply their own affordability calculations and set their own stress tests, based on their data, credit risk appetite and commercial knowledge. Giving lenders the scope to use their expertise in this way will allow more creditworthy borrowers to access the market, without compromising consumer protection.
But regulatory reform alone will not be enough. We also need a significant increase in housing supply, especially of starter homes, if we are to give younger buyers a fair chance of homeownership. And while politically sensitive, some form of Help to Buy-style scheme could provide an immediate and practical boost, as past experience has shown.
At IMLA, we share the FCA’s ambition to widen access to homeownership. But this is best achieved through careful adjustments, not wholesale reinvention. The mortgage adviser must remain central to that vision. The prize – more first-time buyers, more secure households and a stronger economy – is worth striving for. But it requires proportionate, intelligent reform, coupled with bold action on housing supply, not the disruptive upheaval of a functioning market.
