As of 2025, the Financial Conduct Authority (FCA) has introduced new changes as to how the UK mortgage market is monitored.
This is part of a wider effort that is aimed at improving the level of transparency and support for vulnerable borrowers and to make sure that lenders are offering products that are fair and realistic.
These changes come after a period of rising interest rates and increased financial strain on households. They are also a response to the growing demand for mortgage options that reflect how the majority of people actually work and live. This overhaul will affect both borrowers and lenders, particularly in how mortgages are assessed and explained.
Why Has the FCA Changed the Rules?
The FCA’s new approach is particularly focused on improving how the mortgage market works in practice. In recent years, there has been concern about how some borrowers have been treated, especially those who are coming off fixed-rate deals or struggling to keep up with their payments.
These rule changes aim to stop situations where borrowers are trapped on expensive rates, making them unable to switch because of rigid lending rules. They also aim to make the whole process clearer, from initial advice to post-application communication.
What Are the Main Areas of Change?
The FCA’s updates affect many parts of the mortgage journey, including:
- How lenders assess mortgage applications
- The way information is then presented and passed on to borrowers
- How product switching works, particularly in what options are offered
- How borrowers in financial difficulty are supported by lenders
- The quality of communication that lenders must provide to their borrowers
Each of these areas has been updated so that they better reflect current financial realities and improve long-term outcomes for borrowers. In general, the focus is being put back onto improving borrower welfare, rather than maximising lender profits.
A Shift Toward Sustainable Lending
One of the FCA’s biggest changes surrounds the way that lenders assess whether a mortgage is affordable. In the past, the process has often been very strict, with a focus on ticking boxes rather than understanding the full picture.
Lenders are now being encouraged to take a more realistic approach and look at the bigger picture, instead of just asking whether a person can afford the monthly repayment today. The goal is to see how sustainable the mortgage would be for someone over time. That means thinking about whether a loan would still work for a borrower if their circumstances change.
This is especially important for people with non-traditional income, like those who are self-employed or approaching retirement. These borrowers haven’t always had the easiest time getting a mortgage, even if they’ve managed their finances well. Quite often, they’re forced to go through extra hurdles to prove their affordability compared to other people.
The updated guidance gives lenders more room to use common sense. For example, if someone has a proven track record of meeting all their payments for rent and utilities in the past, that should count for something. The goal here is to avoid shutting people out of the market just because they don’t fit into a standard income model.
Clearer Product Information
Mortgage products can be complicated. The FCA is now requiring lenders and brokers to provide clearer, more detailed explanations of how each mortgage works. This includes clearly explaining what happens at the end of a fixed-rate period, how standard variable rates are calculated, and what fees or charges might apply if the borrower needs to exit early.
Borrowers must be able to understand the full cost of their mortgage, not just the initial monthly payment. The goal is to help people make informed decisions, especially at a time when many are feeling financial pressure.
Easier Product Switching
A key part of the overhaul is reducing barriers for people who want to switch mortgage products. Many borrowers have been unable to switch to better deals in the past because they no longer meet current affordability requirements, even though they have kept up with payments on their existing deal.
Under the new rules, borrowers with a good repayment history may be able to switch to a new product without having to go through the full affordability process again. This is particularly helpful for people nearing the end of a fixed-rate period or those who have seen their income change since their original application.
The change is also expected to increase competition between lenders, as more borrowers will be able to move products without unnecessary blocks.
More Support for Borrowers in Difficulty
The FCA has introduced stricter guidelines around how lenders support borrowers who are struggling. If someone falls behind on payments or contacts their lender about financial difficulty, the response must be timely, appropriate, and fair.
Lenders will be expected to offer a range of support options. This could include payment holidays, interest-only periods, or help with restructuring the mortgage. Importantly, lenders must avoid using aggressive or inflexible processes when someone is in difficulty.
The new approach requires lenders to treat each borrower individually, rather than relying solely on automated responses. This is intended to reduce the number of people pushed into default or repossession unnecessarily.
Ongoing Communication
Another part of the FCA’s update is focused on what happens after the mortgage is agreed. Lenders will now be expected to communicate more clearly with borrowers throughout the term of the loan, especially when their deal is coming to an end.
Annual mortgage statements must provide information that is both clear and useful. This includes details of how much is left on the mortgage, how their repayments are being allocated, and what options the borrower has going forward.
Borrowers must also be notified well in advance of any changes to their interest rate, along with clear explanations of what those changes mean.
Increased Accountability for Lenders and Brokers
The FCA has also made changes to how brokers and lenders are held accountable. The Consumer Duty rules, which apply across the financial sector, now require mortgage providers to act in the best interests of their customers. This applies not only at the point of sale but throughout the entire life of the mortgage.
Lenders will need to show that their processes are fair, that their staff are trained to deal with a range of customer needs, and that their products are suitable for the borrowers they are being sold to. Brokers must also make sure that any advice they give is clearly documented and based on the borrower’s actual needs and circumstances, not just on headline rates.
What This Means for Borrowers
As previously mentioned, the new changes that are being brought in should make the mortgage process much more transparent and flexible. This means that borrowers should find themselves with more confidence that their lender is acting fairly, and that they will be able to get help if their situation changes.
Working with an independent mortgage broker, such as Willows Finance, can help borrowers navigate these changes, compare options across lenders, and find deals that meet the new FCA guidelines.
A big part of this is granting borrowers with the ability to switch products more easily. This means that people will no longer be penalised for life events or income changes that are outside of their control. It also encourages lenders to keep offering competitive deals, even for existing customers.
What This Means for Lenders
As for lenders, they will need to review their current processes to make sure that they will be meeting the new expectations put upon them. This will likely include adjusting their affordability models and improving customer communication. In particular, they will need to offer better support options for borrowers who find themselves in difficulty.
It is also likely that lenders will need to invest in training and compliance monitoring so that they can be certain that their teams have the skills needed to manage the new responsibilities. These changes do create extra work for lenders, but they are also a chance to rebuild trust and improve relationships with customers.
Final Thoughts
The FCA’s mortgage overhaul is designed to make the market fairer, more flexible, and more responsive to the way people live and work in 2025. It is a significant update and it will take time for the full impact to be seen, but the direction is clear.
As these changes continue to roll out, it will be important for everyone involved in the mortgage process to stay informed and take action when needed.
Read more:
What the FCA’s Mortgage Overhaul Means for Borrowers and Lenders