FCA Mortgage Regulatory Priorities 2026: Mortgage Rule Review, Responsible Lending and the Later Life Lens
Context:
The FCA published its Mortgages Regulatory Priorities report on 12 March 2026. It covers mortgage and home finance lenders, administrators, and intermediaries, a sector that is under significant pressure from rising swap rates, the Bank of England's rate-hold position, and the broader consumer affordability challenge created by the Iran-driven energy price shock.
The report marks the start of the FCA's formal Mortgage Rule Review process, which is intended to produce a 'mortgage market of the future' that can adapt and innovate to meet consumer needs, from first-time buyers to borrowers in later life. The review sits alongside the MS26/1 Later Life Mortgages Market Study, which is already underway.
The affordability challenge is live and acute: Rightmove's daily tracker showed the average two-year fixed rate jumping from 4.24% to 4.51% in a single week in late March 2026. The FCA's priorities, therefore, balance innovation and growth with a clear supervisory message about supporting borrowers in financial difficulty.
Rules and Guidelines:
Three priority areas are set out. First, improving consumer outcomes under the Mortgage Rule Review: the FCA expects all firms to engage with the Review consultation and to share evidence of barriers, challenges, and risks to delivering innovation. This is a significant opportunity for the industry to shape the replacement for current MCOB rules, and firms that do not engage may find themselves operating under rules designed without their input.
Second, responsible lending and supporting borrowers in financial difficulty: firms must monitor affordability assessments on an ongoing basis to ensure they remain appropriate and deliver good consumer outcomes. The FCA specifically calls out second charge lenders, who must review supervisory findings on second charge mortgage affordability to ensure expenditure assessments are realistic. All firms offering forbearance must ensure it is appropriate to individual circumstances.
Third, ensuring quality of advice: intermediaries must ensure advisers recommend suitable products, including for customers consolidating debt or borrowing into later life. Firms must test consumer outcomes across the customer journey and review the FCA's record-keeping and quality assurance findings from recent second charge supervisory work.
Businesses Affected:
All mortgage and home finance lenders, administrators, and intermediaries are regulated by the FCA under MCOB.
Second charge lenders and brokers specifically, who face targeted scrutiny around affordability assessments.
Later life lending specialists (equity release, retirement interest-only mortgages), given the simultaneous MS26/1 market study.
Appointed representatives operating in mortgage intermediary networks, given the ongoing principal firm oversight agenda.
Next Steps:
Engage with the Mortgage Rule Review consultation when published. Prepare written representations on barriers to innovation and risk. This is the most significant reform to MCOB in years.
Review affordability assessment policies and ensure they are updated for the current rate environment. Check that stress-testing rates reflect current market conditions.
Review second charge mortgage portfolios against FCA supervisory findings on expenditure assessments and suitability records.
Implement or review forbearance frameworks ahead of what may be a sustained period of elevated mortgage costs. Ensure Consumer Duty outcome monitoring captures customers in or approaching financial difficulty.
Track MS26/1 Later Life Mortgages Market Study progress, interim findings are expected later in 2026 and may result in targeted rule changes.
Source | Financial Conduct Authority | Regulatory Priorities - Mortgages
