On 10 April 2024, the Financial Conduct Authority (FCA) published finalised guidance (FG24/2) for firms supporting existing mortgage borrowers impacted by the rising cost of living.

Background

The FCA published finalised guidance in March 2023 explaining how firms can support their customers, including through automated processes and digital channels.  The guidance set out the flexibility firms have when providing forbearance to those who need it, and the scope firms have to vary contract terms for other borrowers who want to reduce their monthly payments. The FCA also noted at the time that the guidance was subject to change if the FCA changed its rules.

In PS23/8, the FCA confirmed changes to its rules, effective from 30 June 2023, to enable firms to meet commitments in the Government’s Mortgage Charter. This meant introducing changes to the Handbook to enable firms to allow most mortgage borrowers to:

  • Vary their mortgage contract to reduce their capital repayments (including to zero, and paying interest only) for up to 6 months.
  • Fully or partly reverse a term extension within 6 months of extending the term without a firm having to assess affordability.

Latest rule changes

Alongside FG24/2, the FCA has published Policy Statement PS24/2 setting out final rules on strengthening protections for borrowers in financial difficulty. The new rules incorporate aspects of the FCA’s Tailored Support Guidance (TSG) into its Mortgages and Home Finance: Conduct of Business (MCOB) Sourcebook. The FCA has also confirmed that it will withdraw the TSG at the point the new rules come into force.

Accordingly, the FCA is updating its guidance by publishing FG24/2 to reflect these changes. The guidance does not impose new expectations or requirements on firms; its purpose is to ensure firms are clear about the effect of the FCA’s rules and the range of options they have to support their customers, including those who are facing higher interest rates alongside the higher overall cost of living. The finalised guidance set out in Chapter 2 of FG24/2 explains how firms can effectively comply with the updated Rules, Guidance and Principles.

Next steps

FG24/2 will come into effect on 4 November 2024, when the Handbook rules come into force and the TSG is withdrawn.