In its policy statement PS25/11, as part of its first steps to simplify mortgages under its Mortgage Rule Review, the regulator said stakeholders raised concerns that the proposal to remove the advice trigger would lead to vulnerable consumers making decisions without advice, but the regulator said it expected people to continue to seek advice.
These changes are voluntary for lenders to introduce.
The FCA added that the concerns did not outweigh the benefits to consumers, and there would be no more of a risk than current execution-only sales.
Borrowers will be able to discuss their options with a mortgage lender and gain more information without being directed to an adviser.
The regulator said: “Consumers will find it easier to shop around and to ask questions about the products they are considering.”
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It added that borrowers would continue to benefit from regulated advice and lenders would consider what is appropriate to identify people who should be signposted for advice or other support.
The positive election requirement, which requires firms to enter into a mortgage contract with a customer following an interactive dialogue, will remain to “boost consumer understanding”.
The FCA said this will not prevent lenders from telling borrowers that they could or should seek advice, nor did it believe this would weaken consumer protection.
No need for full affordability assessment when remortgaging or reducing term
The FCA has also removed the need for a full affordability assessment for borrowers who are reducing their mortgage term, allowing lenders to decide what kind of assessment would be proportionate.
Borrowers will continue to be able to make this decision without seeking advice.
The FCA is also amending the modified affordability assessment for remortgages to include new mortgage agreements where it is more affordable than a borrower’s current mortgage or the new mortgage is available through their current lender.
These rules will be permissive, and lenders can choose to implement them based on their individual risk and customer circumstances.
Two pieces of non-handbook guidance to support borrowers impacted by the cost-of-living crisis and to ensure the fair treatment of borrowers who are unable to pay the capital at the end of an interest-only mortgage will be retired.
The FCA said they had served their purpose and proposed introducing a rule and guidance to say lenders must deal fairly with customers whose mortgage terms have expired and not repossess the property unless other attempts to resolve the problem have been exhausted.
The regulator said reform of the mortgage market was possible because of the “high standards” it had set.
It added that while these changes were voluntary, there was a “collective responsibility” to support sustainable homeownership and a competitive market.
Emad Aladhal, director of retail banking at the FCA, said: “We are helping more people navigate their financial lives by supporting those who can afford to buy a home and supporting competition in the mortgage market.
“Consumer needs have changed over recent years, and our rules are changing too. Today’s changes support growth by simplifying some of our rules, saving consumers time and money, while ensuring they still benefit from advice, where needed.
“We want lenders to use these changes to innovate and better serve aspiring homeowners and existing borrowers. These reforms are another significant step in our mortgage rule review, which we’re delivering quickly. They are supported by the strong protections we’ve already put in place for consumers in the mortgage market.”
