The regulator published FS25/6 in light of responses from the industry on how to reform the mortgage market, focusing on first-time buyers and under-served groups, enhancing later life lending, innovation and protecting vulnerable customers.
Do not compromise advice standards
Justus Brown, CEO and founder of Acre, said the update was a welcome step and showed that the regulator wanted to apply more innovative approaches, such as the use of data and technology to improve affordability and mortgage access.
Brown said: “We hope that the FCA continues to take into account the vital human touchpoints in underwriting and encourages a hybrid human technology model for financial services. It’s human decision-making that allows lenders to support getting many more people onto the housing ladder who might otherwise be excluded by automated decision-making. Delegating to artificial intelligence (AI), no matter how smart, is just replacing one set of automated decision-making with another, but with less accountability as AI is essentially a ‘black box’.”
However, Brown warned there was a danger that this reform could add, not reduce, red tape for brokers.
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“We should be wary of reforms that force firms to constantly prove their compliance with supposedly simpler rules. The changes around vulnerability are especially important: while improvements to how vulnerable customers are treated should be lauded, the goal should be better outcomes for people, not another regulator-mandated box-ticking exercise,” he said.
Seb Murphy, group director at JLM Mortgage Services, said the statement had “clear positives” for advisers and the regulator’s decision to step away from the idea of enhanced advice was right.
He said: “A two-tier system would have caused real confusion and risked pushing clients down the wrong path. That decision matters.”
Murphy said the proposed ideas made advice even more important, but added: “My concern is not what the FCA says it wants, but how this could play out in practice”.
Murphy continued: “Giving lenders more freedom on product design, disclosure and customer journeys must not lead to advice being treated as optional, or something to add later if problems appear. Talk of ‘tolerable harm’ and rebalancing risk needs to stay rooted in real outcomes for real people.
“If access is widened, advice standards must hold firm. Faster journeys and more choice are fine, but they need clear signposting to advice and strong checks for complex cases. Otherwise, we risk repeating old mistakes, just in a more digital form.”
Zara Bray, mortgage distribution director at Quilter Financial Planning, said the roadmap was ambitious and would only work with the government overcoming “deep-rooted housing challenges”.
Bray said: “Even with more flexible lending approaches, limited housing stock will continue to be a major brake on homeownership. Without sustained supply-side action, the benefits of regulatory innovation will be constrained, particularly for first-time buyers facing intense competition for too few properties.”
She said it was right that the regulator was looking at “more proportionate rules” around high-loan-to-income (LTI) lending, interest-only and the use of rental payment history.
“These changes could make a real difference for people who have long demonstrated affordability through high rents but remain shut out of the mortgage market. However, a more permissive regime brings more complexity, and the FCA is clear that robust advice and support structures must develop in parallel to protect consumers from foreseeable harm,” Bray added.
She said the “most striking” part was the focus on advice, and said the regulator acknowledged it was currently “too fragmented” and silos made it hard for people to receive holistic advice.
Bray added: “Its intention to explore more unified advice models and realistic affordability assessments, particularly for older borrowers, is therefore a crucial step.”
She added: “Demand for later life lending will grow sharply as more people reach retirement still carrying mortgage debt due to higher house prices. A market that is already limited in size and scope will need to expand and deliver clearer communication if it is to meet that demand.
“This is not a new area of advice but it will become ever more the mainstream.”
Damien Burke, head of regulatory practice at Broadstone, said this was a “clear shift towards a more risk-sensitive and data-driven approach, moving away from blunt affordability rules towards assessments that better reflect real borrower behaviour and lifetime income patterns”.
He added: “In an age of open finance, AI and economic uncertainty, it’s good to see the FCA acknowledge the option of shifting from traditional affordability approaches towards a more nuanced ‘shape of affordability’ and variable payment structures that have already been introduced in the unsecured personal loan market.”
Burke said it would be interesting to see how innovation and AI-enabled advice would “enhance risk insight and consumer outcomes, rather than simply increasing complexity or mispricing risk”.
Later life lending has become mainstream
Ben Hampton, chief executive of advice at Royal London, said more people would use housing wealth as part of retirement plans, so it “makes sense to start considering how the market needs to evolve to meet that need in future”.
He added: “Importantly, the FCA has recognised that this is much wider than just product innovation, and there is a need to increase the availability and accessibility of advice to help people navigate their options.”
Dave Harris, CEO of More2life, said the FCA recognised that the role of property wealth was changing and no longer a last resort, but increasingly part of mainstream later life planning.
Harris said: “That shift places greater emphasis on advice that looks at the full picture. Customers will not always fit neatly into one category, which means advisers must be confident in knowing when to write a case themselves and when to refer it on. Writing, referring and not ignoring is now essential. Mainstream mortgage advisers need to understand these options and know when specialist input is required, even if they do not advise on them directly.
“Crucially, this also creates an immediate commercial opportunity. Advisers and networks should be acting now to build referral relationships, tighten processes and position themselves well ahead of future rule changes. While 2027 is referenced in the roadmap, the direction is already clear, and those who move early will be better placed to support clients and grow sustainably as the market continues to change.”
Will Hale, CEO of Key Advice and Air, said the statement re-emphasised the “demographic and economic changes”, which led people to access housing wealth later in life.
He also said it was good that the FCA saw the innovation that had happened in the later life mortgage market, such as the ability to make interest payments.
However, Hale said advisers should not wait for the outcome of the FCA’s study and take the opportunity to serve later life clients now.
He added: “Significant customer demand already exists and, alongside the compelling commercial reasons for focussing on this sector, Consumer Duty obligations mean that advisers have a responsibility to ensure customers are aware of all of their options.
“The direction of travel of the regulator is clear; utilisation of property wealth needs to be a central part of financial planning throughout all life stages – not considered just as a last resort. So, particularly when dealing with older customers, advisers must decide whether you should write or refer but ignore later life lending at your peril.”
A market that reflects modern living
Robin Rouwenhorst, mortgage policy manager at the Building Societies Association (BSA), said the FCA has listened to its feedback and included its members’ asks and priorities.
She said the BSA should prioritise changes that delivered the most growth and increased homeownership “through a phased permissive approach”.
Rouwenhorst said: “As people live and work longer, the mortgage market must evolve to support borrowing into retirement. The regulator’s planned review of RIO mortgages is therefore a welcome step forward to a functioning mortgage market for older borrowers.
“Alongside regulation change, it is vital that the mortgage industry collaborates and coordinates to ensure that we enable a dynamic, growing and inclusive market, for now and the future.”
Mary-Lou Press, president of NAEA Propertymark, said the statement was a “welcome recognition that the mortgage market must better reflect modern working lives and changing borrower needs”.
She added: “Moves to simplify rules, modernise affordability assessments and responsibly embrace innovation such as rental payment data and AI-driven advice could make a meaningful difference, provided robust consumer protections remain in place. The fact that the vast majority of mortgages remain out of arrears shows the current system is fundamentally sound, but also that there is room to carefully widen access without increasing risk.
“As affordability pressures ease and lenders adapt following changes to stress testing, reforms should be introduced in a measured way, alongside clear advice and transparency. Ensuring consumers fully understand their options, particularly around interest-only, part-repayment and later life lending, will be key to supporting sustainable homeownership, both now and in the future.”
