MMR lender workshop FAQs - Financial Conduct Authority

Mortgage Market Review lender workshop FAQs

As you will be aware, the interpretation of the FSMA and subordinate legislation or FCA rules as the case may be is ultimately a matter for the courts to determine. However we can offer you the following comments on the points you have raised. These comments are, of necessity, based solely on the facts as you have presented them. 

You will appreciate that, if there were to be any material facts which have not been drawn to the FCA's attention regarding this matter, these facts might alter our view as expressed below. If you remain uncertain of your position you may wish to consider seeking professional legal advice.

Contract variations, product switches and further advances

Q1: When is advice required or execution-only permitted for contract variations?


In the Policy Statement (PS12/16) we clarified our approach to contract variations. The table in Chapter 2, page 14 sets out when contract variations require advice or can be carried out on an execution-only basis. Please also refer to the detailed rules in MCOB 4.8A.10R and MCOB 4.8A.14R.

Q2: What level of evidence is required when assessing affordability for a contract variation?


In the Policy Statement (PS12/16) we clarified our approach to the affordability assessment for contact variations. The table in Chapter 3, page 20 sets out when an affordability assessment is required.

When an affordability assessment is required, the evidence requirements are the same as for a new mortgage application.

Q3: If a borrower requests a further advance and at the same time requests a term change to the existing mortgage, can you process the term extension under the execution-only rules and the further advance with advice?


If the customer is making two or more changes to the contract at the same time and one of the changes requires advice, it would be an advised sale.

Q4: For execution-only rate switches, can we simply send the customer a hyperlink to our website, which has all our products?


If you intend to carry out a rate switch on an execution-only basis, the rules require you to present all the products the customer is eligible for via a non-interactive channel. We do not prescribe how you do this, so you could refer the customer to your website.

Q5: How much information does the lender need to provide on each of the products a customer is eligible for when carrying out a rate switch on an execution-only basis?


We have not published guidance on the information firms need to provide to the customer on each eligible product. It should be sufficient for the customer to be able to identify and communicate their chosen product to you.

Q6: What are the qualification requirements for staff undertaking rate switches and other contract variations?


If the rate switch is made via an interactive channel, either on an advised or execution-only basis (where permitted by MCOB 4.8A.10R), the individual will need to be qualified.

If the rate switch is made via a non-interactive channel, such as online or by post, the individual processing the rate switch does not need to be qualified.  

Pure administrative and back office staff are not captured by the qualification standards.
Please refer to the Training and Competency rules for qualification requirements (TC App 1.1).

Contract variations that require advice must be carried out by a qualified individual.

Contract variations that are not rate switches, carried out on an execution-only basis, may be made by an unqualified individual. Please refer to the Chapter 2 of the policy statement and the following rules for full details: MCOB 4.8A.10R, MCOB 4.8A.14R and the Training and Competency rules for qualification requirements (TC App 1.1).

Q7: For execution-only rate switches, does the customer need to be made aware of the protections they are losing and provide this in writing with the positive election?


Yes. All execution-only customers must be informed of the protections they are losing on assessing suitability as per MCOB 4.8A.14(4) and that they are making a positive election to proceed on an execution-only basis.

Q8: For execution-only rate switches, if products are no longer available when the customer rings the lender, can the lender refer the customer to the website for its latest products while the customer is on the telephone? Do customers then need to be given time to review the products or can instructions be taken over the phone?


The rules require the available products to be presented to the customer via a non-interactive channel. It is up to you to decide how best to do this. There is no set amount of time within the rules that the lender must give the customer to consider the available products.

Q9: For an execution-only rate switch, if the products have changed when the customer calls to confirm their product choice, do lenders have to send out all the products available to the customer again?


If you want to continue to proceed on an execution-only basis, the additional products that are available to the customer will need to be communicated to them via a non-interactive channel. Alternatively the additional products can be discussed with the customer over the phone as an advised sale.

Q10: For rate switches where only one retention product is offered do we need to give advice on that product?


Yes. See PERG 4.6 for guidance where only  one product is offered.

Q11: A customer has multiple accounts under one first charge, and some are unregulated as they were advanced pre-MCOB. If they request a further advance, does advice also need to be given on the unregulated parts of the mortgage?


Our rules only require advice to be given on the additional borrowing.

Q12: When a customer contacts the lender regarding some further borrowing, is the advice tailored specifically to the new borrowing or does the lender have a wider obligation to review the existing mortgage arrangements?


Our rules only require advice to be given on the additional borrowing.

Q13: For rate switches, do lenders still need to check whether the customer is vulnerable?


The circumstances that give rise to the customer being ‘vulnerable’ are unlikely to be relevant for a rate switch (e.g. if there is no additional borrowing then the customer is not consolidating debts, the right to buy transaction has already occurred and equity release and sale and rent back are unlikely to involve a rate switch). However, if they did, then the rules regarding vulnerable customers would apply.

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