On 22 July 2025, the Financial Conduct Authority (FCA) published Policy Statement 25/11: Mortgage Rule Review: First steps to simplify our rules and increase flexibility (PS25/11).

Background

In line with its 5-year strategy the FCA is reviewing its mortgage requirements through the Mortgage Rule Review (MRR).

The first set of proposals under the MRR were published on 7 May 2025 in Consultation Paper 25/11: Mortgage Rule Review: First steps to simplify our rules and increase flexibility (CP25/11). In CP25/11 the FCA set out proposals that are intended to simplify certain responsible lending and advice rules for mortgages so that it is easier, faster and cheaper for consumers to make certain changes to their mortgage and engage with their provider. The deadline for comments on CP25/11 was 4 June 2025.

PS25/11

In PS25/11 the FCA summarises the feedback it received to CP25/11 and sets out final rules and guidance.

The FCA reports that it has finalised most of the rules and guidance broadly as consulted on, with some small changes made in light of feedback. The two key changes that have been made are that the FCA has removed the automatic requirement for advice, in most transactions, where there is interactive dialogue between firms and customers during the sale of a regulated mortgage contract. However, the FCA will continue to require these customers to make a positive election to proceed on an execution‑only basis, reducing the risk that they are unclear on whether they have received advice. Also, the FCA has clarified that firms must consider what procedures are appropriate to avoid causing foreseeable harm, adding the word ‘causing’ into the final rule.

Final rules and guidance

The FCA’s rules and guidance have been finalised including:

  • Mortgage advice and interactive dialogue: The interaction trigger at MCOB 4.8A7R (3) and associated rules and guidance are being removed so that interactions between a firm and their customers will not immediately trigger advice. A rule has been introduced that that requires firms to consider what procedures are appropriate to identify execution-only customers for whom advice, or other customer support, may be necessary to avoid causing foreseeable harm, as part of meeting their obligations under the Consumer Duty. The FCA has listened to feedback, particularly the suggestions that customers who have interactive dialogue and go on to make an execution-only sale may think they have been advised. To mitigate this, the FCA has maintained the requirement for ‘positive election’ in such cases. This means a consumer must confirm that they are aware of the consequences of losing the protections of the rules on assessing suitability and wish to proceed with an execution-only sale.
  • Affordability assessments: The requirement for a full affordability assessment when reducing the term of a mortgage is being removed. However, the FCA still expects firms to consider affordability in line with their responsible lending policy and the Consumer Duty / Principle 2A where they choose to use these changes.
  • Affordability assessments when remortgaging: Themodified affordability assessment is being amended to include new mortgage contracts with new lenders where it is more affordable than either a customer’s current mortgage or a new mortgage product that is available to that customer from their current lender.
  • Retiring FCA guidance: The FCA is retiringtwo pieces of non-Handbook guidance – Finalised Guidance (FG)13/7 and FG24/2 – which have each served their purpose. A rule and guidance are being introduced into the Handbook to clarify that firms must deal fairly with customers whose mortgage terms have expired. Firms must not take repossession action unless all other reasonable attempts to resolve the position have failed. These requirements are supported by the Consumer Duty.
  • Gibraltar: A rule is being added that clarifies that the changes will apply to any Gibraltar-based mortgage lenders who may want to lend within the UK in the future.

Next steps

The FCA states that the changes to its rules and guidance, which are permissive in nature, will come into force immediately. It adds that it knows firms who want to use these rule changes will need time to implement them and so it does not expect that consumers will be able to take advantage of the flexibility they provide immediately. The withdrawal of the relevant non-Handbook guidance will come into force immediately.

DP25/2

On 25 June 2025, the FCA published Discussion Paper 25/2 – Mortgage Rule Review: the future of the mortgage market (DP25/2). The purpose of DP25/2 is to launch a public conversation on the future of the mortgage market and sets out a discussion on the trade-offs and risks that changing the FCA rules would entail. The deadline for comments on DP25/2 is 19 September 2025.