Shaping the future: AMI responds to FCA mortgage discussion paper

Since the FCA published its wide-ranging Discussion Paper DP25/2 in July, AMI has led extensive engagement with the regulator and other trade bodies to ensure the mortgage advice industry’s voice is heard. From the outset, we have emphasised that achieving a functioning housing market requires joined-up thinking across government, regulators and industry, and that focusing solely on policy or new innovation risks creating negative, unintended consequences.

Throughout the summer, AMI facilitated a number of member working groups covering advice, distribution and compliance. The insight members provided has been invaluable in shaping our response, providing real-life practical examples. This insight has allowed AMI to balance our response to reflect the opportunities for innovation but highlight areas where proposals could risk consumer harm.

We have also called out the importance of looking beyond the FCA’s remit. Progress depends on recognising the wider housing ecosystem, from social housing and the private rental sector to first-time buyers and later-life lending. Without cohesive action, supporting only one market sector or customer cohort risks distorting demand and inflating house prices, undermining the very outcomes we would all want to achieve.

Below you’ll find AMI’s headline views across each chapter of the discussion paper. These are only snapshots – you can read our full response now.

Responsible Lending & Affordability

AMI have welcomed the focus on first-time buyers but cautioned against creating additional customer demand; without the appropriate measures to increase supply, this only risks inflating house prices further. We highlighted opportunities for change in rent-based affordability models, shared ownership policy, product innovation e.g. offset mortgages, and evolving income patterns, while emphasising that stress testing and affordability must be seen in the broader context of risk appetite and product pricing.

Later Life Lending

AMI supports widening access to later life products beyond equity release, and called for a review of the existing qualification regime to promote wider adviser awareness. We have recommended streamlining MCOB rules and reviewing the outdated RIO ‘first death stress test’. To strengthen consumer protection, we have stressed that any borrowing beyond retirement should always require advice and be excluded from execution-only sales.

Consumer Understanding, Disclosure & Innovation

AMI calls for a review of current disclosure documents, not replacing the currently used ESIS but recognising that there are areas of confusion, or which are no longer relevant, such as APRC. AMI has also requested that the Cheapest Rule option be reviewed to further reduce unnecessary complexity. Whilst AMI are supportive of product innovation and AI-assisted sales, we are strongly opposed to AI-assisted advice and “enhanced advice” proposals, that risk driving consumers into execution-only journeys. A measured, consumer-focused approach ensuring all relevant segments of MCOB align with the Consumer Duty framework is essential.

Rebalancing Risk Appetite

We have urged the FCA to consider risk appetite alongside all themes, not in isolation, and suggested this should be reflected across upcoming consultations.

We expect the FCA to publish follow-up consultations as we progress throughout the Autum and will keep our members informed.