The volatility in the mortgage sector is having less of an impact on borrowers than in 2022 or 2023 and households appear to be resilient to the uncertainty, the deputy chief of the Financial Conduct Authority (FCA) has said.
Delivering a speech at the Building Societies Association’s (BSA’s) annual conference, Sarah Pritchard said the sector must “pay attention” to the nearly two million fixed rate mortgage deals ending this year.
However, she said the environment was “more encouraging than headlines suggest” and “fundamentally different from 2022 and 2023”.
“This time, rate rises are less dramatic,” Pritchard said, adding: “Most borrowers aren’t facing a sudden jump from ultra-low rates to much higher ones, and many have had time to adjust.”
She said borrowers will have been stress tested at rates higher than the prevailing ones today, adding that the number of accounts in arrears had also fallen.
“And, despite a challenging outlook, the Financial Policy Committee has found that UK households have the resilience to cope,” Pritchard added.
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However, she continued on to say the market should not be “complacent” and that the regulator would continue to monitor the data “closely and regularly”.
Monitoring customer circumstances
Although mortgage borrowers seemed to be managing through the market’s uncertainty, Pritchard said the regulator was watching for signs of increased vulnerability.
She said lenders are already required to “act early and proactively” for consumers in or at risk of financial difficulty, including signposting to free, impartial debt advice.
The evolving market
In June, the regulator will consult on revised responsible lending standards to support first-time buyers and under-served borrowers, and Pritchard noted that more people would need to draw on housing wealth in retirement.
Pritchard said retirement interest-only (RIO) and lifetime mortgages were still considered niche, and the FCA would look at whether the markets needed to change to meet consumer needs and called for insights from the sector.
She applauded lenders for adjusting loan-to-income (LTI) policy, saying 85% of the market had done so, resulting in the “highest level of first-time buyers in years”.
Pritchard added: “All changes aimed at boosting growth, enabling innovation to support consumers, and making our regulation smarter.”