On 11 March 2022, the FCA published a letter (dated 15 February 2022) which it sent to firms in its retail mortgage lenders (RMLs) portfolio.

The letter sets out:

  • The FCA’s views on the key risks of harm for RMLs’ mortgage customers over the next 2 years. The key risks of harm are supporting mortgage customers in financial difficulty, managing maturing interest-only mortgages, responsible lending, LIBOR transition, treating customers in vulnerable circumstances fairly and improving diversity and inclusion.
  • The FCA’s expectations about what RMLs should consider when mitigating the key risks for these customers.
  • An update on the FCA’s work relating to mortgage prisoners, its environmental, social and governance strategy and Brexit. In terms of mortgage prisoners, the FCA encourages RMLs to consider if they can amend their lending criteria to lend to mortgage prisoners who are close to their risk appetite. The FCA has published data so lenders can consider whether they can adapt their lending criteria (or use the flexibility in the FCA’s rules) to lend to these borrowers.
  • The FCA’s regulatory strategy.

Firms within the RML portfolio and their boards are asked by the FCA to carefully consider the degree to which their business presents the key risks of harm and review their strategies for mitigating them. Firms and their boards should be prepared to demonstrate how they are taking reasonable steps to address the risks and the FCA expects them to promptly remediate newly identified issues.

On the same date the FCA also published a letter to firms within its non-bank (mortgage) lenders (NBLs) portfolio. The format of this letter is similar to the one issued to the RML portfolio. In terms of key risks of harm the FCA also covers adequate financial resources. This is due to the COVID-19 pandemic highlighting firms in this portfolio to have adequate financial resources in place. Firms are also reminded to maintain up-to-date wind-down plans which are adequate and approved by their boards.