Independence and limitations
A firm must inform the customer whether there are any limitations in the range of products it will offer the customer, and if so, what those limitations are (MCOB 4.4A.1R(1)). This description has to be based on the entire secured lending market, both first and second charge.
Intermediaries do not have to offer both first and second charge mortgages. They are free to choose which products they offer.
If a firm does not offer a particular product, such as second charge mortgages, it should reflect this restriction in its service disclosure, even if it can introduce the customer to another firm that provides this product in its range of services.
If a firm will not consider direct deals, it need not treat that as a limitation in its product range but must tell the customer as part of its disclosure under MCOB 4.4A.1R(1).
If a firm only offers mortgages from one part of a relevant market (such as first charge only) it should not describe its service as unlimited. An MCD mortgage credit intermediary must only describe itself as ‘independent’ if its consideration of MCD regulated mortgage contracts across the market is unlimited. This is the effect of MCOB 4.4A.4R(3).
From 21 March 2016, firms must tell any consumer looking to increase their existing mortgage about other options that may be more appropriate (MCOB 4.4A.8AR). Where relevant, these will include, in addition to remortgaging:
- a further advance
- another first or second charge secured loan, or
- an unsecured loan.
A firm’s ability to further discuss these options with the consumer is tied to the decision it has made about the range of products it wants to offer (and having all the relevant regulatory permissions).
Our new rules require lenders to provide the customer with a binding offer, which triggers a 7-day reflection period during which the binding offer must remain open. The customer can choose to waive the 7-day period and accept the offer at an earlier point.
A binding offer can include conditions, such as that there be no material change to the facts and circumstances on which the lender has based the decision to make the offer. However, firms may not use conditions in binding offers as a means of avoiding the requirement to do a proper affordability assessment before making the binding offer.
The rules are deliberately non-prescriptive, so it is up to the firm to decide how it records notice of any decision to waive the reflection period.