FCA publishes final rules on simplifying mortgage lending rules under the MRR

The UK Financial Conduct Authority (FCA) has published final policy statement PS25/11, accompanied by a press release, finalising the first set of reforms under the Mortgage Rule Review (MRR). These changes aim to simplify mortgage lending rules and increase flexibility for consumers, in line with the FCA's five-year strategy to support sustainable home ownership and improve consumer outcomes. Following the May consultation, the FCA confirms it will proceed with a majority of the proposed changes as consulted on, with minor amendments in response to feedback. The FCA confirms that it is retiring two pieces of non-Handbook guidance (FG13/7 and FG24/2) and implementing rule changes that streamline the mortgage advice process.

Key finalised changes to the policy include the removal of the interaction trigger (MCOB 4.8A.7R(3)) and associated rules and guidance so interactions between a firm and customer will not immediately trigger advice. The FCA is also removing the requirement for a full affordability assessment when a mortgage term is reduced and is introducing a new rule where firms must consider appropriate procedures to identify execution-only customers who may need advice or support to avoid foreseeable harm, as part of their consumer duty obligations. Furthermore, customers making execution-only purchases after interactive dialogue must still confirm they understand the implications of losing the protections of the rules on assessing suitability, when proceeding without advice.

The final rules are implemented through the Mortgage Rule Review (Execution-Only, Affordability and Expired Terms) Instrument 2025, which takes effect immediately. The FCA also reminds relevant firms that the discussion paper on the future of the mortgage market, which forms part of the next step of the MMR, remains open until 19 September.

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