From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

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The evolution of mortgage regulation

Last updated: 28 November 2016

Latest updates

01/07/16

We have now responded to the Department for Business Innovation and Skills consultation which sought views on ways to improve consumer choice, including improving advice...

More details
25/05/16

The Department of Business Innovation and Skills (BIS) have published a consultation:  Improving the consumer landscape and quicker switching: call for evidence .  They are...

More details

At a glance

  • Mortgages have existed for centuries, but started to become a mainstream product with the emergence of building societies in the 1840s. By the middle of the twentieth century, they had become a mass market product as home-ownership increased dramatically. 
  • Building societies and banks have always been closely regulated. It was not until 2004 that mortgages as a product became subject to statutory regulation.  At this time, the former Financial Services Authority (now the Financial Conduct Authority) implemented the regime for regulating mortgages to homeowners which had been established under the Financial Services and Markets Act 2000.
  • Between 1997 and 2004 the CML Mortgage Code existed as a voluntary system of regulation.  Overseen by the independent Mortgage Code Compliance Board, it applied to both lenders and intermediaries. Its principles helped shape the later statutory framework.
  • Today, there are two parts to mortgage regulation:
    • Conduct regulation, administered via the Financial Conduct Authority (FCA) Mortgage Conduct of Business (MCOB) rules. These were overhauled significantly in 2014 as a result of the FCA Mortgage Market Review (MMR).
    • Prudential regulation, which determines the level of capital that lenders need to hold to offset their lending risks and mitigate the risk of instability in the wider financial system. This is overseen by the Prudential Regulation Authority (PRA), part of the Bank of England, for deposit-taking firms; and by the FCA for firms that do not take deposits.
  • In addition to the regulation of individual lenders by both the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA), lenders have to have regard to additional macro-prudential regulation in the form of directions and recommendations made by the Financial Policy Committee (FPC).
  • Parliament approved regulations granting powers of direction for the FPC over housing tools and specifically limits on residential mortgage lending by reference to loan-to-value (LTV) and Debt-to Income (DTI) ratios on 25 March 2015. The measures came into force on 6 April 2015. 
  • In terms of conduct regulation, different requirements apply depending on whether the mortgage is secured on the borrower's own home, or on an investment property through a buy-to-let mortgage.  All home-owner mortgages are regulated by the FCA, but most buy-to-let mortgages are not. Lifetime mortgages, such as equity release to older borrowers also have their own FCA rules.
  • The most recent major regulatory development is the European Mortgage Credit Directive and Consumer buy-to-let, which affect the rules that apply in the UK. The FCA has made some changes to regulation that came into force on 21 March 2016 to ensure that UK regulation fully complies with it.

There is no lender specific content. For further mortgage regulation information please see our pages on the Mortgage Market ReviewEuropean Mortgage Credit Directive and Consumer buy-to-let.

See our web page for our Mortgage regulation: conduct yourself well event.

Latest updates

01/07/2016

We have now responded to the Department for Business Innovation and Skills consultation which sought views on ways to improve consumer choice, including improving advice and representation and making switching suppliers faster.  In our response, we noted the complexity of the mortgage switching process. The amounts involved are normally quite large and making the wrong decision could be very expensive for consumers so we contend that a simple seven day switching target would not be in the best interests of consumers or lenders.

View the full response on our policy consultation response page. 

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