Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

FCA’s MRR Proposals Shift Focus to Advisers, Not Lenders

The Financial Conduct Authority’s (FCA) CP26/18 consultation paper, which closes on 28 July, introduces proposed changes that impact advisers more than lenders. The proposals include adjustments for self-employed and variable income clients, interest-only mortgages, and bridging loans.

The report highlights that many advisers may have overlooked CP26/18, mistakenly categorising it as relevant only to lenders. However, the changes directly affect advisers’ responsibilities and the advice process for clients with irregular incomes, later life lending needs, and those seeking bridging finance.

Key Changes Proposed by the FCA

For self-employed and variable income clients, the FCA proposes to widen what counts as acceptable evidence for variable income. Lenders may also be allowed to agree payment schedules that are not monthly, such as quarterly payments. This could make it easier for advisers to assist clients whose incomes do not fit traditional lending criteria.

In the area of retirement interest-only (RIO) mortgages, the requirement for lenders to always check whether a surviving joint borrower could manage repayments alone may be dropped. The report notes that RIO arrears are currently under 1%, which has influenced the FCA’s decision to consider loosening this requirement. This change would shift some responsibility for assessing foreseeable harm from lenders to advisers.

For interest-only mortgages, a tiered threshold is proposed. Below 25% of the property’s value, no credible repayment strategy would be required. Above this threshold, tiered evidential requirements would apply. This could open up new options for clients who do not want full capital repayment but are not ready for equity release.

Bridging loans are also addressed, with the FCA proposing to widen the handbook definition to 24 months and reduce re-underwriting requirements when a bridge is extended, provided it is not an interest roll-up.

Implications for Letting Agents and Inventory Clerks

The proposed changes could expand the pool of clients eligible for mortgages, particularly those with non-traditional income or borrowing needs. Advisers will need to update their processes and ensure they understand the new rules to provide accurate advice. The report emphasises that Consumer Duty requirements remain unchanged, and firms must be able to demonstrate robust processes and outcomes monitoring.