The Intermediary – October 2026 - Flipbook - Page 10
RESIDENTIAL
Opinion
Growth needs
scrutiny, not brakes
T
here is a temptation
whenever we talk
about responsible
lending to assume it
means caution, and
that in turn means
doing less, lending less or narrowing
the circumstances in which we
are prepared to say yes. That feels
increasingly difficult to reconcile with
the credit market we actually have.
People are living longer, working
differently, earning money in
different ways and carrying mortgage
debt later into their lives. The
Financial Conduct Authority (FCA)
acknowledged this earlier this year
when it proposed changes to mortgage
rules intended to give lenders greater
flexibility when considering older
borrowers, people with variable
incomes, and those with previous
credit difficulties, while retaining
the fundamental requirement that
lending remains affordable.
At the same time, the refinancing
market demonstrates how quickly
consumer behaviour can change
when economic circumstances
change around it. In the first half
of 2026, 880,635 mortgages were
locked into a new deal up to six
months before maturity. Since the
Mortgage Charter was introduced,
around 354,000 mortgages have seen
monthly payments reduced through a
temporary switch to interest-only or
an extension of the mortgage term.
These are not necessarily signs
of distress, nor should they be
characterised as such, but they are
evidence of a credit market adapting
to a different economic environment,
and to consumers using flexibility
differently from a decade ago.
The challenge for lenders, funders
and investors is therefore not simply
how to maintain the lending standards
established in response to the last
financial crisis, but how to allow those
standards to evolve without allowing
them to weaken.
8
The Intermediary | October 2026
This is where scrutiny becomes
important. Yet audit, assurance,
portfolio review and independent
scrutiny can be regarded as the brakes
to growth – necessary perhaps,
but essentially defensive in their
purpose. In a changing credit market,
we should increasingly see them
differently, because the function of
good scrutiny is not to prevent growth,
but to provide the confidence that
allows organisations to grow safely.
Beyond avoiding harm
If a lender begins serving customers
with more complex incomes, lending
for longer terms, accepting different
repayment strategies or developing
products for groups poorly served
by traditional credit models, the
appropriate response cannot simply
be to measure those decisions against
assumptions created for the market
that preceded them.
Equally, innovation cannot become
an excuse for relaxing the disciplines
that protect customers, lenders and
their funding partners.
We need to understand what is
changing inside portfolios. There are
signs that regulation itself is moving
in this direction. In June, the FCA
talked about a market that must keep
pace with changing consumer needs
and an outcomes-focused regulatory
approach intended to give firms
greater freedom to innovate, while
continuing to deliver good customer
outcomes. More significantly, it
argued that firms need to go beyond
simply avoiding harm and make beer
use of data, technology and insight.
That creates an important
opportunity for the assurance
functions within financial
institutions. Beer data should allow
scrutiny to become less retrospective.
Rather than discovering that a
portfolio has changed aer the event,
lenders should be able to identify
movements in concentrations,
exceptions, affordability, payment
JOHN BARBOUR
is senior director at Broadstone
Lending Advisory Services
behaviour or underwriting paerns as
they emerge.
The question moves from whether
the original policy was followed,
to whether the outcomes being
created remain consistent with the
organisation’s risk appetite and the
assumptions on which its credit
strategy was built.
The opportunity is not to remove
judgement from audit, underwriting
or credit risk, but to give those
exercising judgement a much richer
picture. Properly governed AI has the
potential to identify relationships
across large volumes of portfolio data
that would be difficult for individuals
to see, highlighting paerns,
anomalies and correlations earlier
and allowing human expertise to
concentrate on understanding what
they mean.
The lessons of previous credit cycles
are rarely that nobody could recognise
a problem once it was obvious. More
oen, the warning signs existed
in different places but were not
connected quickly enough. Exceptions
accumulated, concentrations
developed, assumptions became
outdated, or the composition of a
portfolio moved away from what those
overseeing it believed it to be.
Safe growth does not mean
eliminating risk, because credit
cannot perform its economic purpose
without taking it. Nor does it mean
preserving yesterday’s lending models
when the people and businesses they
are intended to serve have changed.
It means making growth
increasingly observable, giving
boards, lenders, funders and investors
the information and independent
challenge they need to understand
what is changing, and whether the
risks remain acceptable. ●
