Regulators have spent the last six months under intense pressure from a government that sees them as one of the blockers to shaking the country from years of slow growth.   

The fallout has seen watchdog heads axed and years of guidance ripped up, which has been welcomed by the City.  

In the mortgage industry, it is unclear where this process will lead and what impact it will have on consumer protections.  

Last month, the Financial Conduct Authority said it was about to “launch a call for evidence on current and alternative approaches to stress testing”.  

In May, this will be followed up by a consultation “to simplify rules” around remortgaging to a new lender, allowing borrowers to seek options outside regulated advice and reducing mortgage terms.  

Then in June the UK’s largest regulator will launch a wider consultation “on the future of the mortgage market”.  

It said: “This will include consideration of risk appetite and responsible risk-taking, alternative affordability testing and product innovation, lending into later life and consumer information needs.”  

The Building Societies Association is just one of several property bodies that have welcomed the FCA’s new direction.  

BSA mortgage and housing policy manager Robin Webb said: “We believe the balance between financial stability and growing the number of first-time buyers has tilted too far in favour of financial stability since the financial crisis.”  

It wants to see The Bank of England’s Financial Policy Committee (the FCA’s chief executive Nikhil Rathi sits on this board) ease its 2014 loan-to-income flow limit for new residential mortgages at LTI ratios at, or above, 4.5 times income.   

UK Finance, the Intermediary Mortgage Lenders Association and Nationwide are among others who have called for this change.  

The Building Societies Association believes there are other areas where home loans can be made more flexible.  

BSA’s Webb added: “Allowing more part repayment, for example, as well as part interest-only lending, with the ability to switch between them as a borrower’s needs change.”  

Imla welcomes the FCA’s May consultation, but warns it carries risks as well as opportunities, such as allowing consumers to opt for unregulated mortgage advice.  

Imla executive director Kate Davies said: “This has already been picked up by some commentators as beginning to weaken the regulatory advice process set out in Mortgage Conduct of Business rules — and will no doubt be much scrutinised when the consultation is published.”   

However, brokers seem clear that the landscape is about to change.  

Connect Mortgages chief executive Liz Syms pointed out: “Mortgage advisers should prepare for simplified remortgaging processes and changing advice requirements.   

“The FCA’s May consultation will make remortgaging easier, creating opportunities for firms that adapt quickly.   

Syms added: “With stress testing rules under review, firms may need to develop expertise in alternative affordability models that consider rental payment history.   

“The regulatory shift also creates space for innovation beyond traditional lending, so exploring partnerships with providers developing new mortgage products will become important.”    

Although, the BSA’s Webb points out that wider reforms which come out of the FCA’s June review will not be “implemented until 2026 earliest”.  

However, the FCA’s Rathi is clear that he does not intend to hand the industry a blank cheque.  

The FCA leader blamed lenders for being “too cautious” in granting first-time-buyer home loans under its current rules, when he appeared before the Treasury Committee last month.  

He said that lenders already have a degree of “flexibility” over the ‘standard variable rate plus 1%’ stress tests they apply to homebuyers coming to the market for the first time, which they have not exercised.   

Rathi also pointed out that possessions are at around 1,000 a quarter, a historically low figure, but “as lenders show greater forbearance, but we have the highest ever number of accounts where arrears are greater than 10% of the balance.  

“So, there are trade-offs here, people are being kept in their homes, but balances are accruing.”  

But there is little doubt that watchdogs are under pressure from government to ease home loan rules, among a range of other City red tape.   

In February, Financial Ombudsman Service chief executive Abby Thomas became the fourth head of a regulator to suddenly leave her post.  

This followed former Amazon UK head Doug Gurr being installed as interim chair of the Competition and Markets Authority after Marcus Bokkerink was replaced in January.  

And In November, Homes England chair Peter Freeman and chief executive Peter Denton announced they would resign after being sent a letter by housing minister Matthew Pennycook, setting out higher 2025 homebuilding targets.  

This all follows a key Mansion House speech by Chancellor Rachel Reeves last November, where she said red tape on City firms had “gone too far” following the 2008 financial crisis.  

In the decade since 2015, UK gross domestic product has only climbed above 3% in 2021 when the economy grew by 8.6% bouncing back from a 10.3% slump the year before due to the pandemic.  

Reeves is determined to get growth moving again. Building 1.5 million homes over the next five years and making sure borrowers have the funds to buy them is a key part of her plan.