UK (Parliament Politics Magazine) – UK watchdog FCA considers scrapping mortgage protections amid calls to ease rules and boost economic growth, raising concerns over increased homeowner risks.
As reported by The Guardian, in response to Chancellor Rachel Reeves, the City watchdog may scrap rules protecting homeowners from repossession to ease business regulations.
Nikhil Rathi’s views on the mortgage charter review
Nikhil Rathi, the Financial Conduct Authority chief, said the mortgage charter is under review amid concerns over its impact on growth.
Scrapping the new charter would remove the safety net that gives homeowners a year’s delay before losing their homes.
Ms Rathi told TheCityUK annual conference in London on Thursday,
“The chancellor sees the regulatory system as having regulated for risk, not growth. So we’re engaging seriously with this feedback, and we continue to make changes at pace.”
She asked,
“Take mortgages: I have raised with the prime minister and the chancellor the mortgage charter. It was designed for a period of sharply rising interest rates. But could it now be retired, with the [consumer] duty in place, repossessions lower, the maturing risk mindset?”
Ms Rathi said,
“Do we need this duplicative approach, with the added reporting burdens it brings? So, as we at the FCA review the mortgage market fundamentally, what signal does it send about political risk tolerance if the charter is retained?”
According to her, the government must communicate its risk tolerance as it pursues growth.
She said,
“One of the reasons I’ve consistently called for an open debate on risk appetite and metrics for tolerable failures alongside metrics for competitiveness growth and operational performance, is to ensure that as we shift to this stance, it will endure over time,” adding, “We want to … give firms and consumers long term confidence to invest, while building greater coherence between government, industry, parliament, and regulators.”
How will UK mortgage rule changes affect homeowners?
The new mortgage charter faces reconsideration, as government ministers push watchdogs to boost the UK’s appeal to businesses and investors.
Chancellor Rachel Reeves warned in November that post-crisis consumer protections had overreached, calling for a rollback in regulation.
She instructed financial regulators to ease restrictions on firms and support bolder business strategies to help City firms grow and compete more efficiently.
To support homebuyers, the FCA may relax mortgage terms tightened during the post-banking crisis reforms.
Due to rising interest rates in August 2023, the mortgage charter was introduced to protect people from losing their homes.
What terms did lenders agree to under the mortgage charter?
49 major banks, including HSBC, Lloyds, and NatWest, signed a charter to protect homeowners. They agreed to:
- A 12-month grace period before repossession
- Access to advice without credit implications
- Six-month interest-only payment options
- Flexibility to adjust loan terms without new checks
FCA’s responsibilities
- Keeps banks, insurers, and crypto companies in check.
- Cracks down on scams, lies, and unfair treatment.
- Fights fraud and shady trading to keep trust.
- Supports new ideas but keeps them safe.
- Bans bad stuff, fines wrongdoers, and can take them to court.