To make sense of where we are with the FCA’s Mortgage Rule Review, it is essential to understand how we got here, because this isn’t a story that starts with June’s consultation paper (CP26/18).

Cast your mind back to May 2025, when the FCA published its first set of proposals to make mortgages easier, faster and cheaper for consumers, including the removal of the interactive dialogue advice trigger from the execution-only rules.

That summer came a wide-ranging discussion paper covering everything from first-time buyer access to later life lending, with a clear message: the mortgage market had evolved, consumer needs had changed, and a review was overdue. Before Christmas, the FCA published its feedback statement and roadmap.

Since that roadmap landed, AMI has been in active dialogue with the FCA, and we support the ambition behind these latest proposals.

With less than 1% of the overall mortgage book in arrears, even after the vast majority of borrowers were effectively stress-tested through the post-Truss higher interest-rate environment, it feels like a logical juncture to rebalance lender risk appetite to some degree. The regulator’s proposals are not a return to the pre-crash days of 2006 or 2007. They are targeted and proportionate, giving lenders flexibility to lend responsibly to more of those creditworthy consumers the current rules are inadvertently excluding.

Let’s think about what that means in practice: a self-employed borrower with variable but significant income; someone with a minor historic credit blip that tells a lender nothing meaningful about their ability to repay today; an older borrower wanting to unlock wealth through a retirement interest-only mortgage. These are the people the FCA wants to help – and so does the mortgage industry. But these proposals cannot work effectively without advice.

Where advice comes in

Across every group these proposals aim to help, the decisions are complex, the trade-offs personal and the consequences long-term. Expecting consumers to self-diagnose suitability, affordability and future repayment capability through an execution-only journey places a disproportionate burden on them, and sits uneasily with the Consumer Duty’s expectations around avoiding foreseeable harm. Advice needs to be there at the outset, when the decision is made, not just at review points further down the line.

Interest-only and part interest-only, part-repayment mortgages illustrate the point. AMI’s view is that part-and-part solutions are often the more balanced and sustainable option, reducing long-term risk while maintaining flexibility. But either way, choosing  a repayment strategy is not always simple, and nor is it a one-time decision. A strategy that looks credible at 35 may look very different at 50; what seems unsuitable at 55 may become entirely rational by 65, such as a mainstream mortgage that pivots to a RIO product. Advisers are essential at both ends: at the point of sale, where credibility is assessed, and at the natural review points as circumstances change.

There is also a dimension that risks being overlooked: protection. In an advised journey, protection is part of the conversation. Since the removal of the interactive dialogue trigger, there is a real question about where that protection conversation happens for consumers on an execution-only journey. In many cases, the honest answer is that it does not happen at all.

That is one of the most concrete examples of what is lost when advice is removed from the process. The FCA’s own Financial Lives data shows that 59% of consumers struggle to manage their financial affairs independently, a clear indication that we cannot design a system that assumes borrowers will always initiate reviews themselves.

That is why responsibility for initiating reviews cannot rest on advisers alone; the whole distribution chain has a part to play. Lenders have a role through regular, timely communications that prompt borrowers to revisit their repayment strategy, and consumers need enough awareness to recognise when to seek support.

AMI has recommended that lenders signpost to advice on execution-only interest-only product transfers, and we intend to take that idea forward with our trade body peers. Advice creates the natural moments for review and constructive challenge, particularly at the end of fixed rate periods, but borrowers first need to be prompted towards them.

What we need from the FCA

AMI broadly welcomes the proposals on credit-impaired borrowers, foreign currency loans and regulated bridging. On non-monthly payment structures, we see the logic but have concerns: Credit Reference Agency reporting is built around monthly cycles, and there are real operational and consumer questions about what arrears look like when someone is paying quarterly. We believe a fuller cost-benefit analysis and wider sector discussion is needed before this goes further.

We also support the proposal to remove existing guidance on assessing affordability for joint retirement interest-only mortgages. Joint RIO cases are naturally complex, often involving different retirement ages, varied pension arrangements, changing income streams and sensitive later-life considerations.

It is the advice process, rather than prescriptive guidance, that ensures couples can weigh their options and the long-term implications of their decisions, including signposting to other solutions such as equity release where appropriate. Flexibility in the rules is welcome, but it is advice that makes that flexibility safe.

But the area needing most urgent clarity is tailored interactive dialogue. The term “interactive dialogue” previously had specific regulatory meaning under MCOB 4.2.1(c), where spoken or interactive exchanges triggered an advised sale. That rule was removed last year. Reintroducing the same terminology without a definition creates genuine liability risk for advisers and lenders alike.

The practical questions run deeper. The dialogue is intended to apply where evidence of a credible repayment strategy is not reasonably available, yet firms are expected to demonstrate consumer understanding of that strategy; it is hard to see how both can hold. And where a lender arranges for an intermediary to undertake the dialogue on its behalf, it must be clear where responsibility and accountability sit.

 Looking forward

We are calling on the FCA to define tailored interactive dialogue clearly within MCOB, with practical examples, and to confirm that advisers will not face retrospective challenge where a reasonable assessment was made on the information available at the time. If the rules remain ambiguous, that uncertainty could deter lenders and firms from adopting the very flexibility the FCA wants to create.

On follow-on products as repayment strategies, we understand the FCA intends credibility to be assessed at point of sale, and we support that, but it must be written into MCOB explicitly. Without it, advisers could face decades of hindsight risk.

This consultation is one piece of a larger picture. The FCA is simultaneously conducting a later-life market study and beginning work on holistic advice, with a further consultation expected by year end. There is also a consumer awareness gap to address: many borrowers still do not know what options are available to them, or when their circumstances might have changed enough to qualify for products they were previously turned away from. All of this work is connected, and all of it has implications for advisers.

What I can promise is that AMI will not be a bystander in this process. We are at the table, engaging constructively with the FCA and the other industry trade bodies at every level. The Mortgage Rule Review will shape this market for years to come and AMI will continue to champion the value of advice while ensuring the intermediary voice is heard as these proposals evolve.

Stephanie Charman, chief executive, Association of Mortgage Intermediaries