FCA mortgages regulatory priorities

The FCA has replaced more than 40 portfolio letters with a new suite of Regulatory Priorities reports, published annually by sector. The mortgages edition arrives at an inflection point — each year, 1.3 million people buy a home, remortgage, or release equity, helped by over 180 mortgage lenders and 5,000 intermediaries.

The FCA is using this moment to announce the most ambitious overhaul of its mortgage rulebook in a generation. Boards and Chief Executives are expected to read this report carefully, review the priorities within it, and act where they need to. Firms doing the right thing can expect less intensive supervisory attention; those causing harm can expect stronger, faster action.

For a sector supporting 9 million households in the UK to own their own home, the stakes could not be higher – and neither could the opportunity. This briefing sets out the FCA's three headline priorities, explains what is genuinely new in the regulator's thinking, and offers practical steps firms should take now.

Priority 1: Improving consumer outcomes under the Mortgage Rule Review

Applies to: Mortgage and home finance lenders, administrators, and intermediaries

The FCA wants to enable the mortgage market of the future: a market that can adapt, innovate, and meet consumer needs and expectations, from first-time buyers to those in later life. The scale of what is being proposed is significant. The FCA is simplifying its mortgage rules to broaden access for first-time buyers and underserved consumers, enhance later life lending, enable innovation, and protect vulnerable consumers.

The momentum behind this agenda is already visible. Following a statement in March 2025 clarifying the flexibility in the interest rate stress test rule, 85% of the market has updated its approach and is able to offer around £30,000 more to borrowers, supporting first-time buyers in owning their own home. Rule changes introduced in July 2025 are making it easier to remortgage with a new lender, reduce the overall cost of borrowing through term reductions, and discuss options with a firm whilst still being able to seek advice if needed.

In June 2025, the FCA opened a discussion on the future of the mortgage market. A feedback statement followed in December 2025, setting out a roadmap for delivery, including a focused market study on later life lending to assess the market's readiness to deliver for consumers in future and to inform further policy development.

What is new

The Mortgage Rule Review represents a fundamental shift in the FCA's posture. Consumers are entering the mortgage market later, borrowing for longer, and repaying into later life; for many, the costs of retirement may not be met by pensions and savings alone, driving greater demand to access housing equity. Previous FCA portfolio letters focused primarily on conduct standards within the existing rulebook.

This report signals something materially different: most proposals will be permissive, creating opportunities for firms to operate differently. The FCA is not merely supervising within existing rules – it is actively rewriting them. Rebalancing risk appetite across the market is intended to make it more dynamic, innovative, and competitive. The explicit commitment to a focused later life lending market study, as part of a formally published delivery roadmap, is entirely new territory.

Practical steps for firms

• Engage with the FCA's rule review and the focused later life mortgage market study – the consultation pipeline for H1 2026 is active and early engagement will allow firms to influence the outcome.
• Share with the FCA any barriers, challenges, and risks to delivering innovation in products and services – this is an explicit invitation from the regulator, and firms that engage proactively will help shape the rules they operate under.
• Continue to set and manage your own independent risk appetites and take responsibility for the outcomes you deliver – the permissive nature of the new framework does not absolve firms of accountability; it transfers more of the decision-making to them.
• Consider experimenting with AI, using the FCA's sandbox services and Innovation Pathways, including the Supercharged Sandbox for smaller market participants.

Priority 2: Encouraging responsible lending and supporting borrowers in financial difficulty

Applies to: Mortgage and home finance lenders and administrators

The market is resilient: arrears have remained low despite higher interest rates. But the FCA is not complacent, and it does not expect firms to be either. Whilst mortgage rates have stabilised, some borrowers are rolling off historically low 5-year fixed rates, and the FCA is watching closely. The number of mortgage accounts with a payment shortfall peaked in H1 2024 and has now fallen to its lowest level since H1 2022 – but that improvement masks ongoing vulnerability in certain borrower cohorts.

The FCA has seen lenders adapting their affordability assessments in response to the clarification of the interest rate stress test rules and the FPC's updated LTI flow limit recommendation, which is helping more consumers with home ownership. However, in second charge markets, standards have fallen short. The FCA's work on second charge mortgages found that affordability assessments could be more robust, with some lenders' expenditure assessments relying on assumptions that did not appear realistic to the customer base nor adequately consider some types of expenditure.

What is new

Previous FCA portfolio letters on mortgage lending emphasised robust affordability standards as a constraint on lending behaviour. The tone here is more nuanced. The FCA will consult on further changes to mortgage rules, acknowledging that there will be trade-offs as it rebalances risk, whilst maintaining that responsible lending and high standards of conduct will remain core principles.

The explicit acknowledgement that broadening access may require recalibrating affordability norms (without abandoning them) marks a genuine evolution in the FCA's messaging. Second charge lenders, in particular, should review the findings of the FCA's recent supervisory review to ensure that their affordability assessments are robust and expenditure assessments are realistic for their customers.

Practical steps for firms

• Monitor and oversee affordability assessments to ensure they remain appropriate and deliver good consumer outcomes, including when broadening access.
• Second charge lenders should review the findings of the FCA's recent supervisory work on second charge mortgages and ensure that affordability assessments are robust and expenditure assessments are realistic for their customers.
• Support customers through financial difficulty, including offering appropriate forbearance.
• Ensure that consumers in financial difficulty get the right support – the FCA will be monitoring and undertaking supervisory work in this area throughout the year.

Priority 3: Ensuring the quality of advice

Applies to: Firms providing mortgage or home finance advice, including intermediaries and lenders

The FCA wants to see advisers in intermediary firms and lenders recommending products that are suitable for consumers' needs. The evidence from the FCA's second charge mortgage review paints a troubling picture of current standards. Standards of advice could be improved, particularly for debt consolidation, with some advisers focusing on assessing whether consumers were eligible for the loan rather than whether it was suitable for their needs and circumstances. Record-keeping was sometimes incomplete, making it hard to demonstrate that advice was tailored and appropriate, which in turn weakened quality assurance processes.

The second charge market serves consumers that may have characteristics of vulnerability, including low financial resilience, putting them at a greater risk of harm – which makes the quality of advice in this market a matter of acute regulatory concern.

What is new 

The FCA's advice quality agenda is not new, but its specificity is. Second charge mortgages make up less than 4% of mortgage sales, yet over 95% are sold on an advised basis – making advice quality the primary determinant of whether consumers in this market are protected or harmed. The directness with which the FCA has communicated remedial expectations to individual second charge firms signals a move from general supervisory messaging to targeted intervention.

The FCA is also considering policy changes to support good outcomes for consumers consolidating debt and exploring options to deliver more holistic advice to consumers considering using their housing wealth in later life, neither of which featured in previous portfolio letter communications.

Practical steps for firms

• Ensure advisers recommend products that are suitable for consumers' needs, including those who are consolidating debt or borrowing into later life.
• Test consumer outcomes across the customer journey – outcome testing is not a compliance exercise, it is the primary mechanism by which the FCA will assess whether firms are meeting the Consumer Duty.
• Second charge advice firms should review the findings of the FCA's work on second charge mortgages and ensure they are delivering good outcomes; all firms providing advice should review the elements of the findings relating to record-keeping and quality assurance.
• Invest in quality assurance frameworks that are genuinely capable of identifying poor advice – not merely frameworks that document the advice process without scrutinising its substance.

Additional areas requiring attention

1. Fraud: Poor systems and controls lead to more fraudulent applications being submitted and more consumers' data being lost. Fighting financial crime remains an FCA priority and it will use data and analysis to identify outlier firms and target its engagement.
2. Incentives and conflicts of interest: The FCA has seen evidence of conditional selling (estate agents requiring consumers to use specific mortgage intermediaries) and is looking at incentives, including both first and second charge firms and estate agent-based brokers.
3. Appointed representatives: The FCA expects principals to have robust systems and controls relating to their appointed representatives, reviewing onboarding, monitoring, oversight, and wind-down plans holistically and on an ongoing basis, and ensuring advice fees are set and monitored consistently and in line with the Consumer Duty.
4. Disorderly failure: The FCA expects firms to have adequate systems, controls, processes, policies, governance and oversight to mitigate the risk of disorderly failure, with resilience testing and action plans that are sophisticated, detailed, and tailored.
5. AI: The FCA expects firms to consider and test the opportunities and risks that AI presents, keeping the Consumer Duty and consumer needs at the heart of any innovations and maintaining good governance and controls.
6. SMCR reform: The FCA will work with the Treasury and the PRA to review the Senior Managers and Certification Regime.

Conclusion

The FCA's March 2026 Regulatory Priorities report for mortgages is the most consequential communication the regulator has directed at the sector in years, not because it introduces new supervisory burdens, but because it signals a fundamental rebalancing of the relationship between the FCA, firms, and consumers. The consolidation of more than 40 portfolio letters into a single annual document is not merely an administrative convenience — it is a statement of intent from a regulator that is deliberately raising the stakes for Boards and Chief Executives who have previously been able to treat supervisory correspondence as a compliance team matter. 

The three priorities: improving consumer outcomes through the Mortgage Rule Review, encouraging responsible lending while supporting borrowers in difficulty, and ensuring advice quality – together define a regulator that is simultaneously more pro-growth and more forensically focused on outcomes than any prior communication to this sector has suggested. Where the FCA identifies serious misconduct, it will consider the tools available to it, including supervisory intervention or enforcement. That warning applies equally to lenders broadening access without adequately recalibrating affordability standards, second charge firms whose advice and record-keeping falls short, and intermediary principals whose appointed representative oversight is inadequate. 

At the same time, the FCA is committed to delivering on its roadmap – consulting on mortgage rule changes, undertaking a focused later life lending market study, and developing its monitoring and supervision framework to support the wider rebalancing of risk. Firms that engage early (with the rule review consultations, the later life lending market study, and the FCA's innovation services) will help design the framework that governs the sector for the next decade. Those that do not will find themselves regulated by a framework written without them. The FCA has set out its agenda with unusual clarity. The only question is which firms will step forward to shape what comes next.