In its regulatory priorities report for the mortgage market, it said it wanted the sector to adapt, innovate and meet consumer needs, from first-time buyers through to later life.
It will simplify its mortgage rules and support firms to broaden access to mortgages for first-time buyers and under-served consumers, enhance later life lending, enable innovation and protect vulnerable consumers.
The FCA said most of these proposals would be permissive and give firms the chance to change the way they operate. It said it expected firms to set and manage their own risk appetite.
The regulator also said firms should monitor affordability assessments, including when broadening access to mortgages, to ensure they are appropriate and deliver good outcomes.
The FCA said there would be “trade-offs” as it rebalanced risk in the mortgage market, but responsible lending and high standards of conduct would continue to be core principles.
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It wants firms to share any barriers, challenges and risks to delivering innovation, support borrowers through financial difficulty and recommend products that are suitable for consumers’ needs. The regulator also expects firms to test consumer outcomes across the customer journey.
This year, the regulator will consider changing policy to support good outcomes for borrowers consolidating debt and explore options to deliver more holistic advice to consumers considering the use of housing wealth in later life.
It will also look at the systems and controls within firms to mitigate the risk of failures, fraudulent applications and incentives that lead to conditional selling.
As part of its timeline, the FCA will make changes to loan-to-income (LTI) policy, responsible lending rules, affordability for retirement interest-only (RIO) mortgages and artificial intelligence this year. Early next year, it plans to look at holistic advice, disclosure framework and debt consolidation.
