FCA's CP26/18 Proposes Six Mortgage Rule Changes, From Quarterly Payment Schedules for Variable Incomes to Narrowing the 'Credit-Impaired' Definition and Capping Bridging Loans at 24 Months, With Responses Due July 28

On June 9, 2026, the UK's Financial Conduct Authority published consultation paper CP26/18, titled "Mortgage Rule Review: Supporting first-time buyers and underserved consumers". The paper proposes changes to the regulator's mortgage rules in six areas. It is a consultation, which means the FCA is asking for views before deciding; none of the proposals is yet in force. This article is based on the FCA's press release of the same date and on law-firm summaries of the paper, and it does not reproduce the full rule text, which readers should consult in the consultation paper itself.

Where the paper sits in the review

CP26/18 is one step in a wider Mortgage Rule Review. According to a law-firm summary, it follows Discussion Paper DP25/2 of June 2025 and Feedback Statement FS25/6 of December 2025. The FCA says in its press release that it set out plans to reform the mortgage market in December 2025. The same summary says the FCA is continuing policy work on three other themes of the review: lending in later life, enabling innovation, and protecting consumers in vulnerable circumstances. Those themes are not part of CP26/18.

The FCA's stated aim and its evidence

The press release says the proposals would encourage lenders to assess affordability using a person's full and current situation, rather than excluding people over minor or past credit history issues. It adds that lenders would face fewer barriers to offering flexible repayments for people with variable income and to lending to people paid in foreign currency, and that the proposals include supporting consumers in understanding their options. David Geale, the FCA's executive director for payments and digital finance, said: "Our mortgage rules need to keep pace so those who can afford to repay can borrow." The regulator also notes that around 99% of mortgages taken out since 2014 are not in arrears, despite rising interest rates and living costs. The press release does not set out how that figure was calculated.

The six areas of proposals

According to a law-firm summary of the paper, the proposals cover the following.

Interest-only and part-and-part mortgages. Three changes are proposed: adapt the requirements for when a credible repayment strategy is needed, add examples of credible repayment strategy options, and clarify expectations for reviews, with examples of review trigger points. The press release says most borrowers would still need a clear repayment plan unless they are borrowing a smaller amount.

Retirement interest-only mortgages. Current guidance sections would be removed so that joint retirement interest-only applications are assessed in the same way as standard joint mortgages. Firms would not always have to consider whether a sole borrower can afford the loan if a joint borrower dies. The press release presents this as making it easier to unlock property wealth for older borrowers.

Variable and irregular income. The FCA would expand its guidance with examples of the evidence that can be used to assess affordability, and clarify that lenders may agree payment schedules at non-monthly frequencies, such as quarterly. The press release names self-employed people as a group that could benefit.

Foreign-currency loans. The standards for loans denominated in a foreign currency would be separated from those for loans where the borrower's income is in a non-sterling currency. The stated aim is to move from prescriptive rules derived from the Mortgage Credit Directive to an outcomes-focused approach consistent with the Consumer Duty, the FCA's standard for how firms treat retail customers.

Credit-impaired customers. The 'credit-impaired customer' definition would apply only in MCOB 11.6.16R, in the advice example at MCOB 4.7A.22 G, and in SUP 16.12 reporting. Firms could set their own credit risk appetite and target markets, but would be expected not to treat the glossary definition as a factual sign of unaffordability.

Bridging loans. The Handbook definition of regulated bridging loans would be amended to include terms of up to 24 months, and the total term, including the original term and any extensions, would be capped at 24 months. The summary says the FCA states that these proposals do not overlap or conflict with the statutory exemptions in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

Timing

Responses were requested by July 28, 2026. The summary says the FCA intends to publish a policy statement, which would contain the final rules, in the second half of 2026, and gives no more specific date. This article does not cover any policy statement published since, so readers should check the FCA's website for the current position. The press release adds that the FCA is using an online tool to gather consumers' experiences of the mortgage market, alongside feedback from firms.

What the sources do not say

Some points are not in the press release or the summaries cited here. They do not mention changes to loan-to-income limits, and this article therefore does not describe any. They do not give figures for how many more people might obtain a mortgage, and they do not give a date on which changes would take effect. The press release also does not describe advice-specific proposals beyond the reference to the advice example in the Handbook.

How to read the proposals

Three points help. First, a consultation lists what the regulator proposes, and the final text can differ after responses are considered. Second, several of the proposals concern guidance and definitions rather than new limits, so their effect depends on how lenders choose to use the extra flexibility. Third, the bridging loan proposal is about how the regulatory definition is drawn, and it is separate from the affordability themes in the press release.

What to watch

The next milestone is the policy statement. Readers should look for whether the six areas survive unchanged, how the final wording treats the credit-impaired definition, and whether lenders announce changes to their own criteria. This article is a summary of public documents and is not mortgage or legal advice.