Michael Shand, Managing Principal at consultancy Capco comments on the FCA’s ongoing review of mortgage rules:
“The FCA’s ongoing review of its mortgage rules is the latest sign of the regulator recognising the mortgage market must evolve to meet the needs of modern consumers. Modern society is made up of a range of different profiles, including an increasing number of self-employed people, individuals who are borrowing later in life and people with portfolio careers, and the FCA’s review opens up more opportunities for these groups.
“There’s clear potential here to help more consumers not only get onto the property ladder, but also move more easily through the different stages of home ownership. Changing the rules to make it simpler and easier for people to access products, or lowering onerous advice requirements in low-risk circumstances, would be positive changes to introduce.”
Managing complexity and risk
“This is as a pivotal moment to foster more innovation. If implemented effectively, these changes could give lenders the ability to be more precise and thoughtful in how they tailor products and services for today’s more complex borrower profiles. And there is an opportunity for firms to leverage data and technology to meet these needs more precisely. The smarter use of data, analytics and insights can enable firms to personalise risk assessments, better understand target segments and develop solutions that are both competitive and inclusive.
“A more flexible framework expands access to borrowing but inevitably adds complexity. Banks need to manage the risks associated with this, whether through more tailored underwriting, more detailed risk reporting or changes to how they manage capital reserves.”
A pivotal moment for mortgage innovation
“While simplification is the goal for the FCA, lenders will need to think carefully about how they manage risk, especially for customers with uncertain incomes or those borrowing later in life. Clearer rules and stronger data will help, but firms must be prepared to show how they’re protecting consumers if things go wrong, particularly if interest rates rise.
“Ultimately, to make the most of this moment firms need to think strategically, not just about how they meet today’s consumer needs but how they build for the future. That means using data and technology to offer more personalised, flexible products, while also strengthening their approach to risk. Done well this review could unlock real innovation in how mortgages are designed and delivered.”
