On 7 March 2025, the Financial Conduct Authority (FCA) published a new webpage where it outlines the flexibility for firms in the interest rate ‘stress test’ rule and considers the effect of future rate rises on mortgage affordability.
As interest rates fall, the current market approach to interest rate stress testing may be unduly restricting access to otherwise affordable mortgages. The FCA wants to ensure firms are aware of the flexibility its rules provide, and that creditworthy consumers can access the affordable mortgage they need, supporting home ownership.
The FCA also explains that it is carrying out a review of the mortgage rules, including the responsible lending rules. MCOB 11.6.18R is being evaluated as part of this review. The FCA will shortly issue a call for evidence on the impact of this rule.
The FCA has also written to the Economic Secretary to the Treasury regarding simplifying responsible lending and advice rules for mortgages and has outlined further plans that include:
- Later this month, the FCA will be working with experts, including from the mortgage sector, through an Open Finance Sprint to explore how smart data can enhance mortgage products and services.
- In May, the FCA will consult on proposals to make it easier for consumers to remortgage with a new lender, reduce their overall cost of borrowing through term reductions and discuss their options with a firm outside a regulated advice process. It will also consult to retire outdated regulatory guidance, such as its maturing interest-only mortgage guidance.
- In June, the FCA will launch a public discussion on the future of the mortgage market. This will include consideration of risk appetite and responsible risk-taking, alternative affordability testing and product innovation, lending into later life and consumer information needs.