Mortgage lenders expect regulatory scrutiny to ease next year despite recent interventions by the Financial Conduct Authority and continued debate over the balance between access to credit and financial stability.
A poll of senior mortgage industry figures found that 35% believe regulatory oversight will ease in 2026, according to research conducted by Target Group.
The findings were gathered earlier this month at the Future of Mortgage Servicing conference at the Belfry, hosted by Target Group alongside Phoebus Software.
The survey captured the views of 100 C-suite mortgage professionals. While just over a third predicted a loosening of regulatory scrutiny, an equal proportion said they expected no material change. The remainder believed regulation would become more intense.
MORTGAGE STRESS TESTING
The results come against a backdrop of renewed political and regulatory discussion about mortgage rules introduced after the global financial crisis.
The FCA continues to oversee riskier lending through responsible lending requirements for consumers, a principles-based framework for business lending, and macroprudential controls developed in conjunction with the Bank of England.
The Consumer Duty regime has further reinforced expectations around borrower outcomes and the prevention of financial harm.
Earlier this year, the FCA issued updated guidance on mortgage stress testing, including proposals that could affect loan-to-income caps, alongside a broader review of mortgage regulation.
Separately, the Chancellor, Rachel Reeves, has said she wants to simplify responsible lending and mortgage advice rules, lift certain limits on borrowing and encourage greater access to homeownership, while opening a debate on the trade-off between higher lending volumes and default risk.
UNINTENDED CONSEQUENCES
Pete O’Connor (main picture), Chief Executive of Target Group, says recent policy discussions reflected a growing tension between regulatory safeguards and economic growth.
He also warns that any rollback of post-crisis rules would need to be carefully managed to avoid unintended consequences.
He says: “Consumer Duty remains central to our thinking and any relaxation must not compromise borrower outcomes or data integrity”, adding that poorly calibrated reforms could result in higher arrears and an increase in repossessions, placing greater pressure on lenders’ collections operations and servicing platforms.
AGILE TECHNOLOGY
O’Connor says lenders would increasingly need agile technology systems capable of adapting quickly to shifts in regulatory scrutiny and lending risk, particularly if underwriting standards were loosened.
Separate polling suggests that scepticism about reform remains widespread among brokers.
Research conducted by the buy-to-let lender Landbay over the summer found that only 16% of brokers believed proposed mortgage reforms would materially help first-time buyers, while just 7% thought they would stimulate broader market growth. Around a third said they expected the changes to result in riskier lending.
