United Kingdom's Financial Conduct Authority calls on second charge mortgage firms to improve affordability assessments, advice and fee transparency

The Financial Conduct Authority (FCA) published findings from a review of the second charge mortgage market and told lenders and brokers to raise standards in how they assess affordability, advise customers and apply fees. The FCA identified weaknesses in some firms’ practices that could increase the risk of financial harm for borrowers, particularly those using second charge mortgages to consolidate debt. Areas of concern included affordability assessments that appeared to miss key living expenses, advice that steered customers towards debt consolidation without clear evidence it was appropriate, inadequate record keeping, and fees that were unclear and often added to the loan, making comparisons difficult. While the FCA found examples of good practice, it questioned whether some firms are meeting expectations, including under the Consumer Duty, and urged wider mortgage market brokers to review record keeping and quality assurance. The FCA is continuing engagement with firms covered by the review and said that over the next year it will keep working with the sector to drive improvements, monitor firms and use the full range of regulatory powers where needed, and begin considering whether mortgage policy changes are required to support good outcomes for consumers consolidating debt.