Speaking on a panel at the UK Finance Annual Mortgage Conference, Edwin Schooling-Latter, director of markets and wholesale policy at the FCA, said the authorities were working together to come up with a standard rate that could be used across the sector.
He added that the International Swaps and Derivatives Association (ISDA) had been called to take the lead on the issue.
Also on the panel, Doug Laurie, director programme lead at Barclays, said there would not be just one alternative rate to transfer mortgages onto as the Sterling Overnight Index Average (SONIA) would be more appropriate for larger corporate firms.
He said lenders needed to aim to “build a way of using SONIA or the average of that rate” to calculate interest on loans and mortgage contracts.
He said SONIA would likely be used at the top end of a loan book but smaller corporates and retail sectors should look for alternatives.
“Whether that’s the overnight rate or using other traditional forms; bank of England rate, fixed rate or potentially some other form where the rate can be defined or simplified for the client,” he added.