When Open Banking launched in 2018, it was heralded as a ‘revolution’ – a gateway to smarter, more personalised products and services. Expectations were high.

But several years on, it has, at best, underwhelmed.

The technology promised transformation, yet uptake has been patchy – particularly among smaller firms, many of which lacked the infrastructure or appetite needed to take advantage of the rules.

As a result, Open Banking stands as a cautionary tale that looser regulation on its own doesn’t guarantee progress.

That’s a lesson worth remembering as the FCA considers one of the biggest shake-ups to mortgage regulation since the Mortgage Market Review in 2014.

DP25/2 has been covered in depth by this magazine, so I won’t dwell on the details. But it signals a willingness to usher in a new era of flexibility in how affordability and suitability are assessed.

While light on specifics, the paper makes it clear that the FCA wants to make it easier for people to get a mortgage than it is today. As with Open Banking, though, regulatory reform won’t move the needle by itself. Lenders need to meet it halfway.

That was the prevailing mood at a recent roundtable on the future of the mortgage market that we hosted at communications consultancy MRM, where participants spoke at length about the need for genuinely innovative products and more flexible underwriting to tackle the affordability crisis.

While views varied on how to achieve that, one idea that stood out was the concept of intergenerational mortgages, which emerged in Japan in the 1990s in response to soaring house prices and sluggish wage growth. Sound familiar?

These loans allow borrowers to take out loans of 50 years or more and pass the debt onto their children. By stretching the loan over such long terms, repayments become more affordable, helping younger buyers to get onto the housing ladder earlier.

Of course, it’s unlikely that the UK will ever embrace this model. In Japan, the concept of the ‘family home’ is more embedded – it is normally for properties to stay within families for generations.

That’s not the case in the UK. Here, many people may view inherited debt as a financial burden that they didn’t sign up for.

However, whether intergenerational mortgages become a thing or not is beside the point. The broader argument participants were making was that lenders need to innovate and think differently – even radically – to address the affordability challenge.

We’ve seen some product evolution in recent years, such as longer-term fixed-rate deals, which have added genuine value to brokers’ toolkits. But they remain relatively niche and it’s hard to argue they represent real innovation.

Skipton’s “Track Record” mortgage – a 100% LTV loan that uses rental history as a proxy for affordability – was another welcome addition.

Before that? You could argue offset and guarantor mortgages were truly innovative products. You could also make a case for shared ownership, too.

But overall innovation has largely been absent in recent years.

Admittedly, regulation has long acted as a brake on product development and risk appetite. But DP25/2 suggests the regulator is now willing to ease some of those constraints.

That creates an opportunity – and there is a feeling that the industry can’t afford to squander it.

That’s important, because the market has changed. Affordability has deteriorated dramatically over the past two decades, with the average property in England now costing more than 7.7 times the average salary, up from 4.2 at the turn of the century, according to the Office for National Statistics.

Meanwhile, the nature of work has evolved. Freelancers, gig workers and side-hustlers are now commonplace, and traditional career paths are increasingly fragmented and non-linear.

Retirement ages are creeping up, too. Recently, Labour announced a review of the state pension age. For younger borrowers, working into their 70s may well become the norm.

Yet despite these shifts, lending criteria remain stuck in the past. That disconnect was one of the strongest themes to emerge from our roundtable. Participants agreed that lenders are still too rigid and slow to adapt to the realities of today’s workforce and housing market.

The FCA’s paper hints at a more flexible future, a chance to move beyond the rigid ‘computer says no’ mindset that brokers frequently bemoan.

But whether that happens depends on lenders being willing to act. The opportunity is there – but so is the risk of inaction.

Of course, regulation and lender innovation alone won’t fix the housing crisis. Without an increase in housing supply, loosening affordability rules will simply make homes less affordable.

But that’s outside lenders’ control. What is within their control is how they respond to the opportunity in front of them.

If they they’re too cautious, DP25/2 and the potential new rules that emerge from it risk joining Open Banking as another case of wasted potential.

The regulator is laying the groundwork. Lenders, it’s over to you.

Paul Thomas is head of news and content at MRM