FCA review finds uneven standards as lending hits pre-crisis high
Second charge mortgage lenders and brokers have been told to strengthen how they assess affordability, give advice and present charges, after a review by the Financial Conduct Authority found weaknesses that could expose some borrowers to financial harm.
The regulator said the risks were greatest for customers using second charge borrowing to consolidate debt, a group it described as more likely to have high existing commitments and limited financial resilience. While the review identified examples of good practice, it also flagged concerns about whether some firms are meeting expectations, including under the Consumer Duty.
Among the issues cited were affordability checks that appeared to miss key household costs, advice that directed customers towards debt consolidation without clear evidence it was suitable, poor record keeping, and fees that were not always set out clearly. The FCA said charges were often added to the loan, which can make comparisons harder for consumers.
The review comes as activity in the second charge market rose sharply in 2025, with both the value and volume of new business reached their highest levels since before the 2008 financial crisis.
Figures from the Finance & Leasing Association showed new second charge advances totalled £2.14 billion in the 12 months to December 2025, up 24% on the prior year. Over the same period, the number of new agreements increased 17% to 41,760.
“The second charge market is relied on by people often already heavily in debt,” said David Geale (pictured right), executive director of payments and digital finance at the FCA. “It’s vital it works well, but we’ve found that standards are not always where they need to be. This needs to change.”
The FCA has asked second charge firms to review the findings and take action where needed. It also said brokers in the wider mortgage market should consider the findings, particularly around record keeping and quality assurance, and assess whether they can make improvements.
The regulator said it will continue engaging with the firms included in the review to ensure shortcomings are addressed. Over the next year, it plans to work with firms to drive improvements across the market, continue monitoring and take action where concerns remain, and consider whether mortgage policy changes are required to support good outcomes for consumers consolidating debt.
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