CP26/18: FCA consults on mortgage rule changes across six areas, responses due 28 July 2026

What was published

The FCA published consultation paper CP26/18 on 9 June 2026, setting out proposed changes to mortgage lending rules intended to help more creditworthy consumers access suitable mortgages.

The consultation covers six areas: interest-only and part-and-part mortgages, retirement interest-only (RIO) mortgages, variable and irregular income, foreign currency loans, credit-impaired borrowers, and bridging loans.

A minor amendment to paragraph 5.23 was made on 12 June 2026 to reflect the Registry Trust's role in advocating for the recording of partial settlements. This does not affect the substantive proposals.

CP26/18 builds on discussion paper DP25/2, published in June 2025, and feedback statement FS25/6, published in December 2025.

Who it affects

The FCA identifies three groups that should read the full paper: mortgage lenders and administrators, home purchase providers and administrators, and mortgage intermediaries.

Key proposals

On interest-only and part interest-only lending, the FCA proposes to give lenders more discretion while still expecting most borrowers to have a defined repayment strategy, except where the loan amount is below a specified threshold. The specific threshold is set out in the consultation paper and was not available at time of publication. The FCA states explicitly that it does not aim to make these products universally accessible, and has weighed the risk of adverse outcomes for some consumers against the risks of consumers renting for longer.

On credit-impaired borrowers, the FCA proposes that lenders take a more individualised approach to assessing creditworthiness rather than declining applicants based on a definition designed for debt consolidation and reporting purposes.

On RIO mortgages, the FCA cites the statistic that 43% of working-age people are projected to be under-saving for retirement. It states that better access to accumulated housing wealth could help these consumers achieve their financial goals in later life.

Responsible lending requirements remain in place throughout. The FCA's proposals do not remove firms' duty to check that a mortgage is affordable.

Related measures

The FCA notes that its separate interim intervention on high loan-to-income lending allows firms to discuss individual guidance beyond the 15% threshold. It estimates this has created capacity for up to 36,000 additional loans for first-time buyers and up to 28,000 for home movers and remortgagors. This intervention is not part of CP26/18.

The FCA will track outcomes using the following measures:

• volume of interest-only mortgages taken out by first-time buyers and the self-employed
• sales of RIO mortgages
• volume of mortgages taken out by credit-impaired consumers
• arrears levels

Next steps

Three further themes of the Mortgage Rule Review, covering later life lending, innovation, and consumers in vulnerable circumstances, remain in development and are not part of this consultation.

Action required

Responses to CP26/18 are due by 28 July 2026. The FCA expects to publish final rules in a Policy Statement in the second half of 2026. Mortgage lenders, brokers, and home purchase providers should read the full paper and consider whether proposed changes to interest-only, credit-impaired, and variable-income rules require updates to lending policies and credit assessment frameworks.