The Responsible Lending Review published by the Financial Conduct Authority (FCA) concluded that overall firms have positively applied the responsible lending requirements, which came into force in April 2014 following a Mortgage Market Review (MMR).

However the review found that some firms need to make process improvements to help them consistently assess and record their lending decisions.

It added that some firms could also be more proactive and consistent in making use of flexibilities and exceptions to the responsible lending requirements for existing customers.

The FCA found no evidence that the rules have prevented firms lending responsibly to consumer groups such as older borrowers and the self-employed. However the regulator was especially mindful that older consumers represent an increasing proportion of the UK population and it is important that the mortgage market continues to develop a range of products that can meet their needs.

Christopher Woolard, director of strategy and competition at the FCA, said: “For millions of consumers a mortgage is one of the biggest financial transactions they will enter into in their lifetime so it’s encouraging to see firms embrace the spirit and the letter of our rules.

“At the same time, there appears to be more to be done to improve competition in the mortgage sector. Competition can play a key role in ensuring that the sector works well, delivering lower prices, better products and choice, and more innovation.

“Based on the evidence we’ve collected so far, we intend to launch a forward-looking market study later on this year, with particular focus on the roles played by intermediaries and panels.”

The Council of Mortgage Lenders (CML) welcomed the review’s outcome and said that improving consumers’ ability to make better choices about mortgage deals is already an area of work being actively pursued as part of its ongoing work on transparency following the successful launch of the common mortgage tariff last year.

CML director general, Paul Smee, said: “We are pleased that the regulator has identified no significant faults in the market. This is testament to the level of commitment that lenders showed in implementing the new requirements that emerged as part of the Mortgage Market Review.

“Through our voluntary transparency initiative, working jointly with Which?, we are fully engaged with the consumer choice agenda that the FCA identifies as an area for study later in the year. We are already looking to make the kind of progress that will make it easier for consumers to compare and understand their options, and look forward to working constructively with both the industry and the regulator on this.”