The Association of Mortgage Intermediaries (AMI) has responded to the FCA’s Mortgage Rule Review consultation and cautioned that good advice is crucial to the proposals working well for consumers.

The FCA’s consultation, Supporting First Time Buyers and Underserved Customers (CP26/18), suggests ways to increase access to mortgages for first-time buyers and underserved consumers.

AMI said it describes the proposals as targeted and proportionate rather than a return to pre-crisis practices.

AMI believes there is room to rebalance lender risk appetite responsibly, broaden opportunities for home ownership and open the door to creditworthy consumers currently locked out by existing rules, whilst retaining the underlying regulatory framework.

On repayment structures, AMI welcomes the FCA’s clear statement that interest-only is only appropriate for certain cohorts of customers with credible repayment strategies, but highlights part-and-part as the more balanced and sustainable option for many consumers, reducing long-term risk while retaining flexibility.

AMI does not believe the FCA’s proposals can be effectively implemented without advice. A key focus of its response is the role of advice in helping consumers understand their options, make informed decisions and ensuring the proposals work effectively in practice.

The trade body has also identified several areas where clarity is needed before the proposals can be implemented with confidence:

• Tailored interactive dialogue requires definition. The term previously carried specific regulatory meaning before its removal last year and reintroducing it without a definition creates liability risk for advisers and lenders, and confusion for consumers about whether they are receiving advice.
• Point-of-sale credibility assessments for follow-on repayment strategies must be written explicitly in the final rules, so advisers are not exposed to future retrospective challenge.
• Keep repayment strategies under review. Consumers need the right prompts and support to review their repayment strategy at key moments, particularly when a fixed-rate period ends. While lenders have a role through timely communications, advice can provide an important opportunity for review and constructive challenge. AMI has recommended that lenders signpost consumers to advice when executing interest-only product transfers, helping support informed decisions and good consumer outcomes.
• Non-monthly payment structures need a fuller cost-benefit analysis and wider sector discussion, given credit reference reporting is built around monthly cycles.

AMI also broadly welcomes the proposals on retirement interest only, credit-impaired borrowers, foreign currency loans and regulated bridging.

AMI chief executive Stephanie Charman said: “We share the FCA’s ambition and have been working with the regulator, consulting with our trade body counterparts and seeking insight from our members to inform our response to these proposals, many of which we deem to be sensible and proportionate for the creditworthy consumers the current rules inadvertently exclude.

“But these proposals will only work if lenders and advisers adopt and implement them, otherwise they will fail in their aim to improve access to the market for more first-time buyers. It is important that the areas highlighted by AMI are addressed by the FCA through the final rules and guidance, to ensure firms have the clarity and confidence needed to adopt the proposals effectively.”