FCA Mortgage Rule Review: Opening access while raising the bar on outcomes

The FCA’s latest consultation (CP26/18) marks a significant shift in the direction of the UK mortgage market. Building on its Mortgage Rule Review and underpinned by the Consumer Duty, the regulator is seeking to rebalance risk, unlock access, and drive better outcomes for consumers. 

While many of the proposals focus on removing unnecessary barriers to lending and providing firms with greater flexibility, they also place increased responsibility on firms to demonstrate that customers are receiving good outcomes. As firms consider how these changes may impact their lending strategies, underwriting approaches, and target markets, there is a clear expectation that governance, oversight, and customer outcome monitoring evolve alongside them. 

Firms reviewing their lending frameworks should also be taking the opportunity to assess the maturity of their risk management and outcome testing frameworks. Doing one without the other risks missing a valuable opportunity to strengthen Consumer Duty compliance and evidence good customer outcomes. 

What is the FCA trying to achieve? 

At its core, CP26/18 reflects a simple but important message:The mortgage market needs to better reflect how people actually live and earn today.

Key proposals from CP26/18

The proposals focus on removing barriers that exclude certain groups of borrowers, including: 

• More flexible affordability assessments 

• Supporting variable and non-traditional incomes 

• Changes to interest-only and part interest-only lending 

• Improving access to lending in later life 

• A clearer stance on “credit impaired” borrowers 

Implication: A shift away from rules-based lending towards outcome-based assessment. 

What good looks like under these changes  

1. Treat flexibility as a controlled risk, not a commercial opportunity

Greater access should not mean looser standards. 

It means applying judgement within a clearly defined risk appetite, supported by governance. 

Firms must be able to demonstrate that their decisions lead to good customer outcomes. 

2. Define target markets with more precision, not less 

“Underserved customers” is not a target market. Firms need to be clear on which customer segments are suitable, under what conditions products work for customers and where they do not.  

3. Build outcome testing into everyday decision-making 

Firms should be moving toward: 

• Monitoring outcomes for different customer cohorts 

• Testing whether product features behave as expected 

• Identify where flexibility leads to poorer outcomes 

• Tracking outcomes over time 

• Act quickly where risks emerge 

This is not just MI. It’s a feedback loop into product design, underwriting and governance. 

What firms should be doing now

Firms don’t need to wait for final rules to act. The focus should be on: 

Reassessing affordability frameworks

• Are affordability models too rigid? 

• Do they reflect real customer income patterns? 

Tightening target market definitions

• Are underserved groups being excluded unnecessarily? 

• Are definitions (e.g. credit impaired) still appropriate? 

Strengthen product governance

• Do products align with customer needs? 

• Are risks clearly identified and mitigated? 

Enhancing outcomes monitoring

• Can you evidence good outcomes across segments? 

• Are you testing real-world usage and sustainability? 

Embed outcomes testing into decision-making 

• Are decisions driven by outcomes, not just compliance? 

• Can you demonstrate this to the FCA? 

Final thought

CP26/18 is not just about making it easier to lend. It’s about making firms more accountable for what happens after they do. 

The FCA is opening the door to greater access but expects firms to step up and take responsibility for ensuring that access leads to sustainable, positive outcomes. 

For firms, success will depend on one thing: 

Using flexibility not just to lend more but to lend better.

If you’d like to explore how these mortgage reforms impact your approach to affordability, product design and governance, and what good outcomes look like in practice, get in touch to speak with one of our experienced compliance specialists. You can also find more detail on our outcomes testing approach by downloading our Consumer Duty Outcomes Monitoring pack.