The FPC announced it would lower its benchmark capital requirements for UK lenders to 13% of risk-weighted assets, down from 14%, in December 2025.

The move was intended to free up lender capital while keeping an appropriate level of money in reserves.

Today the BSA said it supported the FPC’s decision. The trade body said: “We agree that capital levels should neither be too high nor too low in order to optimise economic growth while minimising the risk (and cost to GDP) of future crises.”

It added: “The mortgage market in the UK is of particular relevance to the BSA, and capital requirements have a direct impact on the level of building society lending. In the last five years, the UK has experienced the COVID pandemic and a cost-of-living crisis, coupled with the market dislocation and volatility caused by the September 2023 mini-budget.

“Throughout this period, building societies and credit unions have continued to support their members, while not observing any material increase in mortgage credit losses.”

The trade body added that there could be room to relax lending rules further in certain situations.

The BSA said: “While it is right to be pleased by the absence of mortgage losses, this also begs the question of whether lenders have been able to take enough risk? Or whether too much capital allocated to low-risk mortgage lending is crowding out lending to businesses and other economic growth priorities.

“We acknowledge the significant government support for mortgage borrowers during the same period, which cannot be relied upon in any future crisis.

“However, the level of capital now held against low-risk mortgages through pillar 1 IRB hybrid model adjustments, the IRB floor, pillar 2a, MREL, leverage ratio and buffers – around ten times the pillar 1 requirements – is arguably disproportionate to the underlying risks of unexpected losses (expected losses being captured by IFRS9 provisions which also include layers of conservatism).”