Insights and Analysis

UK Mortgage Rule Review: FCA takes first step in introducing targeted flexibilities into the regulatory framework

08 September 2025

The FCA has finalised the changes that were proposed in May this year to make it easier for customers to engage with mortgage providers and make reductions to mortgage terms and remortgaging easier. This includes removing the customer interaction trigger for advice and introducing flexibility for affordability assessments when reducing a mortgage term or remortgaging. Some non-Handbook guidance has also been retired. As the amended rules are permissive in nature, there is no implementation period so the changes came into effect immediately upon publication of the FCA's Policy Statement (PS25/11) on 22 July 2025.

What changes have been made?

The changes that were proposed¹ in Consultation Paper 25/11 (CP25/11 – see our related article here) have mostly been taken forward by the FCA, as summarised below. See Policy Statement (PS25/11) here and the related Handbook instrument here for more detail.

Advised sales

Spoken or interactive dialogue between a firm and a customer during a sale will no longer trigger a requirement for the firm to provide regulated mortgage advice. This will make it easier for execution-only customers to get the right information before taking out a mortgage.
The FCA has decided to retain the requirement that customers positively elect to proceed with an execution-only sale where they have had interactive dialogue with the firm. This is to mitigate the risk of customers thinking that they have received advice and benefit from the protections of the FCA’s rules for assessing suitability.
Firms need to consider whether processes are appropriate to identify execution-only customers for whom advice, or other customer support, may be necessary to avoid causing foreseeable harm in relation to entering into or varying a regulated mortgage contract.

Authored by Soo Oh, Virginia Montgomery and Charles Elliot.

Chapter 1 Regulatory Developments: Payments

Affordability assessments

The requirement for a full affordability assessment when reducing a mortgage term has been removed. Firms can therefore assess affordability in a way that is proportionate to the customer’s needs if a customer seeks this change to their mortgage contract. However, they must keep in mind their obligations under the Consumer Duty. For example, they should monitor and assess customer outcomes to ensure that their affordability assessments are appropriate.
The modified affordability assessment may now be applied to a new mortgage contract with a new lender where it is more affordable than (a) the customer’s current mortgage, or (b) a new mortgage product that is available to the customer from their current lender.

Chapter 2 Regulatory Developments: Digital Assets

Authored by Soo Oh, Virginia Montgomery and Charles Elliott.

For more on the key initiatives announced as part of Mansion House 2025 and in the government's Financial Services Growth and Competitiveness Strategy, take a look at this Our Thinking article.

If you would like to discuss how we can help you in relation to these developments, please reach out to any of the people listed in this article or your usual Hogan Lovells contact.

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