Flexible lending rules must go hand-in-hand with high-quality advice

20 September 2025

The Intermediary Mortgage Lenders Association (IMLA) has set out its response to the FCA’s discussion paper on the future of the mortgage market (DP25/2), welcoming a shift toward greater regulatory flexibility, provided reforms preserve consumer protection and, crucially, the central role of professional mortgage advice. IMLA also urges the regulator and Government to tackle the biggest brake on first-time homeownership: the serious shortage of suitable properties.

Key points from IMLA’s response

1. Advice remains critical.

With around nine in 10 mortgages arranged via intermediaries, consumers clearly value advice. Any regulatory simplification must not dilute access to impartial, professional guidance. In fact, the FCA should continue to encourage advice-led journeys so customers can compare their options confidently and avoid foreseeable harm.

2. Boost housing supply to unlock first-time ownership.

Affordability reform alone will not deliver high-volume first-time buyer activity. A significant increase in the supply of appropriate, genuinely affordable homes, especially starter homes, is essential.

3. Do not intervene to push long-term fixed rates.

IMLA does not support regulatory efforts to promote long-term fixed-rate mortgages. These products rely on funding models (e.g. covered bonds) that are not typical in the UK, tend to be more expensive and inflexible, and – crucially- British borrowers have shown limited appetite for them, as highlighted in the David Miles review. If meaningful consumer demand existed, the market would already have scaled competitive solutions.

4. Targeted affordability reform.

IMLA favours pragmatic updates to stress-testing and supports lenders’ discretion to set appropriate buffers rather than a single central stress rate. We also support sensible use of rent-payment histories as part of a broader affordability assessment, not a sole determinant.

5. First-time buyers and LTI constraints.

We welcome recent relaxation in the application of the LTI flow limit, which had rationed higher-LTI lending to credit-worthy first-time buyers. Further recalibration should be grounded in robust risk evidence and individual lender judgment/risk appetite.

6. Later-life lending: adviser access, not new rules.

IMLA does not believe the regulator needs to intervene in later-life borrowing - the market will develop the solutions consumers need. The single most important factor is timely access to a qualified adviser who can assess needs and, where appropriate, signpost or refer to a specialist via clear, industry-led pathways.

7. Shared Ownership.

Barriers to Shared Ownership largely arise from scheme administration and documentation (e.g. housing association processes), not FCA rules, therefore regulatory intervention is unlikely to boost volumes.

8. EPC policy.

On energy efficiency, any measures must treat all tenures fairly - lenders should not be made responsible for the EPC status of mortgaged properties.

9. Responsible AI with advice at the core.

IMLA supports innovation that uses AI to reduce admin and improve processes, but AI should assist, not replace qualified advice. The market will evolve faster than any rule changes - the FCA’s role should be to monitor real-world use and safeguard consumers.

10. ‘Enhanced’ advice level unnecessary

IMLA believes the imposition of an additional level of advice which certain groups should receive would introduce extra complexity and risk over-engineering the advice process in an unhelpful way.

Kate Davies, executive director, IMLA, said:

“We cautiously welcome proportionate, evidence-led steps that could help more people into homeownership where they genuinely improve outcomes. But professional mortgage advice is non-negotiable. Intermediaries are central to helping consumers navigate choice, risk and affordability. The UK mortgage market is broadly working well for a wide range of customers and does not need root-and-branch reform. Any changes should be measured, carefully staged and developed in close consultation with industry so we widen access without undermining standards.”