Rules that protect UK homeowners from repossessions may be scrapped

The Guardian

26-06-2025

The City watchdog is considering scrapping rules meant to protect struggling homeowners from having their homes repossessed, in the latest sign of regulators reacting to pressure from the chancellor, Rachel Reeves, to remove red tape for businesses.
The chief executive of the Financial Conduct Authority (FCA), Nikhil Rathi, said the much-lauded mortgage charter was up for review as the body tries to show it is addressing accusations that its rules have hindered economic growth.
Repealing the newer charter, introduced only two years ago under the former Conservative government, would mean homeowners would no longer have a safety net that granted a 12-month grace period before potentially losing their home.
'The chancellor sees the regulatory system as having regulated for risk, not growth. So we're engaging seriously with this feedback, and we continue to make changes at pace,' Rathi told TheCityUK annual conference in London on Thursday.
'Take mortgages: I have raised with the prime minister and the chancellor the mortgage charter. It was designed for a period of sharply rising interest rates. But could it now be retired, with the [consumer] duty in place, repossessions lower, the maturing risk mindset?' Rathi asked.
'Do we need this duplicative approach, with the added reporting burdens it brings? So as we at the FCA review the mortgage market fundamentally, what signal does it send about political risk tolerance if the charter is retained?'
Although relatively new, the mortgage charter is now one of a number of regulatory measures being reconsidered, as ministers order watchdogs to make the UK more attractive to businesses and investors.
Reeves threw down the gauntlet in November, saying that consumer-friendly regulations put in place after the global financial crisis had 'gone too far'. She ordered financial watchdogs to encourage more risk-taking and roll back rules that may have been curbing the growth and competitiveness of City firms.
The FCA is now looking at how it could ease home loan rules, including those that were tightened after the banking crisis, in order to boost property ownership.
The mortgage charter was introduced amid fears that millions of people could be at risk of losing their homes amid soaring UK interest rates, which hit 5.25% in August 2023. The surge resulted in much higher monthly payments for households due to sign on to new fixed-term contracts, as well as those on trackers, where contract rates move in lockstep with the base rate.
Ultimately, 49 lenders, including HSBC, Lloyds Banking Group, NatWest, Santander and Nationwide, signed the charter, agreeing that:
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No home would be repossessed within 12 months of the first missed payment.
Customers could seek advice from their lender without it affecting their credit score.
Customers could switch to an interest-only deal for six months; or extend their mortgage term and revert back within six months if they want. Neither option requires an affordability check or will affect their credit score.
Rathi said it was important for the government to be transparent about the amount of risk it was willing to take as part of its growth drive. 'One of the reasons I've consistently called for an open debate on risk appetite and metrics for tolerable failures alongside metrics for competitiveness growth and operational performance, is to ensure that as we shift to this stance, it will endure over time.
'We want to … give firms and consumers long term confidence to invest, while building greater coherence between government, industry, parliament, and regulators.'