New rules for first charge mortgage lenders and administrators

You need to be aware of new rules that have come into force as a result of the Mortgage Credit Directive being implemented.

If you are a lender and you also arrange or advise on mortgages, see our page for first charge intermediaries.

Main changes

There are some important changes to the Mortgages and Home Finance Conduct of Business (MCOB) rules. You also need to be aware of changes to other areas of the Handbook, eg Training and Competence (TC) and the Prudential Sourcebook for Mortgages (MIPRU).

The changes mean that first charge mortgage lenders:

  • need to provide a binding mortgage offer and 7-day (minimum) reflection period
  • need to give an adequate explanation of a product’s essential features
  • are subject to new disclosure requirements.

Binding offers and the 7-day (minimum) reflection period

During the reflection period the offer is binding on the lender but the consumer can accept the offer at any time.

Binding offers can include some conditions. See MCOB 6A.3.3G for a complete list of examples of these conditions.


The rules require you to issue a European Standardised Information Sheet (ESIS). This is a mandatory product disclosure document that is replacing the Key Facts Illustration (KFI).

You must issue an ESIS by 21 March 2019, although you can choose to use it before that date. If you issue a KFI rather than an ESIS, you must provide your customers with:

  • information on the 7-day right of reflection
  • information on the APRC and the borrowing rate where the interest rate is variable
  • extra information for foreign currency loans, where applicable, including an illustration of the impact of a 20% change in the exchange rate.

Adequate explanations

You must provide an adequate explanation of the proposed mortgage contract and any ancillary services. The explanation must include the:

  • pre-contract information
  • essential features of the product
  • potential impact on the consumer (including the consequence of default).

The manner and extent of this explanation can vary depending on the circumstances of the sale. You should consider how you provide an adequate explanation for both advised and execution-only sales.

Second charge mortgages

Your existing mortgage permissions permit you to undertake second charge mortgage lending activity. If you do undertake second charge activity, you need to be aware of the new requirements when second charge mortgage regulation becomes subject to our mortgage rules. See second charge mortgages for more information.

Key dates

MCD implementation – firms required to meet the new rules for mortgages entered into from this date

21 March 2016

Disclosure document can be either ESIS or KFI with ‘top up’ disclosure

21 March 2016 until 20 March 2019

Transitional arrangements for MCD knowledge and competency requirements

Until 21 March 2017

Professional experience of staff can be relied upon to meet MCD knowledge and competency requirements

Until 21 March 2019

Disclosure document must be ESIS

21 March 2019

Further information