FCA CP26/18 and Complex Residential Cases: A Broker’s Guide

Alaisdair Carey is a Residential Underwriting Manager at LendInvest

The FCA, the UK’s financial regulator, wants to move from box-ticking to outcomes. For the borrowers you struggle to place today, that could be the most important shift in a decade.

Every so often a consultation paper lands that is worth clearing your desk for. CP26/18, published by the FCA in June, is one of them. Titled “Mortgage Rule Review: supporting first-time buyers and underserved consumers”, it proposes something genuinely significant: unwinding a large chunk of the prescriptive, MCD-derived rules that have governed mortgage lending for years, and replacing them with an outcomes-based framework aligned to the Consumer Duty.

It’s easy to get carried away, but context is key. With the FCA signalling that policy development and implementation will run through this year and next, this represents a longer-term direction of travel rather than a rewrite you can lend against overnight. Yet, that direction matters, and it points squarely to the complex and underserved borrowers that specialist lenders (like LendInvest) and brokers exist to serve.

Prescriptive vs. Outcomes-Based Underwriting: What CP26/18 Changes

The current regime, much of it introduced by the Mortgage Credit Directive, tends to work by prescription. It sets out particular tests, particular ways of evidencing affordability, particular stress assumptions, and lenders build processes to satisfy those rules. That has virtues: it is consistent and auditable. Anyone who does not fit the template will struggle with prescriptive rules. The self-employed applicant with two strong years and one lean one. The contractor whose day rate tells a very different story to their tax return. The later-life borrower with real assets but atypical income. The applicant with a historic credit blip that is not reflective of their current creditworthiness.

An outcomes-based framework asks a different question. Instead of “does this case pass this specific test?” it asks “has the lender reached a sound, evidenced judgement that this borrower can afford this loan, and is the outcome a good one for them?” That is the language of the Consumer Duty, and it gives lenders room to exercise judgement rather than mechanically apply a formula. For complex cases, judgement is everything.

Target Borrowers: Who Benefits Most From FCA CP26/18?

The FCA is explicit about who it wants to help: first-time buyers, borrowers with variable, irregular or self-employed income, later-life borrowers and those carrying historic credit impairment. If that list reads like your harder-to-place pipeline, that is not a coincidence. These are the segments a prescriptive rulebook has quietly underserved, and they are precisely the cases that land on my desk. An underwriter’s job is to look past the headline number and understand the story behind it. A framework that formally makes room for that story is one I welcome.

Packaging Complex Cases: Why Narrative Matters Under Outcomes-Based Rules

If the proposals develop as drafted, I would expect the emphasis to shift further towards narrative and evidence over rigid ratios. That plays to a broker’s strengths. The cases that will move fastest are the ones where the story is told clearly: why income looks the way it does, why a past blip is genuinely behind the borrower, how the loan sits comfortably within their means. Context that a prescriptive rule might have discounted becomes something an underwriter can actively weigh. As the underwriters never meet the applicants and have no role in the thorough factfind carried out by their financial advisor, so much of the context is often lost. Any changes to rules that will empower the underwriter to look beyond the numbers should be welcomed. 

A few practical things to watch. First, expect more variation between lenders, not less – outcomes-based rules give firms latitude, and they will use it differently, so knowing each lender’s appetite will matter more than ever. Second, keep documenting affordability thoroughly; “judgement” does not mean “less evidence”, it means evidence used more intelligently. Third, none of this is retrospective, so continue to place today’s cases under today’s rules.

The Role of Broker Feedback in Shaping FCA Mortgage Regulation

Brokers see the sharp end of the current rules every day: the creditworthy borrowers who fall marginally outside a standard template. That lived experience is essential as this regulatory framework continues to take shape. Staying engaged with these industry shifts, whether through ongoing regulatory feedback or via your trade body, ensures the evolving rules remain grounded in the realities of complex lending. 

At LendInvest, assessing cases on their merits is not a change of direction we are waiting on; it is how specialist underwriting has always worked. We look at the borrower in front of us, not just the boxes they do or do not tick. If the FCA’s proposals move the wider market in that direction, so much the better for the underserved borrowers who have been waiting for it. In the meantime, if you have a case where the story matters more than the template, that is exactly the kind of conversation we like to have.

LendInvest plc is a public limited company registered in England and Wales (No. 8146929). Registered

Office: 4-8 Maple Street, London, W1T 5HD.

LendInvest Mortgages and LI Mortgages are registered trading names of LendInvest Loans Limited. LendInvest Loans Limited is authorised and regulated by the Financial Conduct Authority (FRN:737073). LendInvest Loans Limited is a company registered in England & Wales (Company No. 09971600) and is a wholly owned subsidiary of LendInvest plc.

Regulated lending is provided via LendInvest Loans Limited (Company No. 09971600). Unregulated lending is provided by LendInvest BTL Limited (Company No. 10845703) and LendInvest Bridge Limited (Company No. 11651573), which are wholly owned subsidiaries of LendInvest plc.

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