FCA softens remortgaging rules in dash for growth
The Financial Conduct Authority (FCA) is set to remove red tape on remortgaging in the latest sign public bodies are tearing up their rulebooks to align with the government’s growth agenda.
In new measures introduced by the City regulator, mortgage holders will be able to reduce the terms of their borrowing and switch to new lenders more easily, allowing homeowners to benefit from cheaper products.
The watchdog, which unveiled changes to mortgage rules in January, said reforms could come into effect due to its “high standards”.
Officials said effective affordability checks, support for those who get into financial difficulty and a separate set of standards over good outcomes for borrowers allowed the City regulator to slash red tape.
Emad Aladhal, director of retail banking at the FCA, said the new rules would help to protect borrowers and encourage competition among banks, building societies and other lenders.
“We are helping more people navigate their financial lives by supporting those who can afford to buy a home and supporting competition in the mortgage market,” Aladhal said.
“Consumer needs have changed over recent years, and our rules are changing too.
“Today’s changes support growth by simplifying some of our rules, saving consumers’ time and money, while ensuring they still benefit from advice, where needed.
“We want lenders to use these changes to innovate and better serve aspiring homeowners and existing borrowers.
“These reforms are another significant step in our mortgage rule review, which we’re delivering quickly. They are supported by the strong protections we’ve already put in place for consumers in the mortgage market”.
FCA moves ahead with deregulation
Charles Roe, director of mortgages at UK Finance, said the rules would help house buyers and allow lenders to respond to demands more constructively.
“The FCA’s reforms are a welcome step to help lenders respond more effectively to customer needs and widen access to homeownership,” Roe said.
“Their optional nature means that firms can apply them in line with their own risk appetites.
“By reducing regulatory friction and enhancing switching flexibility, the reforms will enable the mortgage sector to continue to support the government’s growth agenda, by supporting both new and existing mortgage customers.”
The FCA has been among a number of regulators to look at cutting red tape as part of a wider drive for growth.
Capital markets have also come under the FCA’s radar as recent Mansion House reforms will see the requirement to produce a prospectus for public secondary share raises upped from 20 per cent to 75 per cent of existing share capital, a move which could save firms millions of pounds a year.
In separate reforms targeted at first time buyers, Chancellor Rachel Reeves said the regulators would allow more high loan-to-income mortgages of up to 4.5 times a buyer’s income.