Mortgage Responsible Lending Update

In April this year we published an article about the Mortgages Market Study that included a summary of the consultation paper aimed at updating the responsible lending rules to modify the affordability assessment for some customers. The article can be read here.

The proposals are to modify the affordability assessment where the customer:

  • has a current mortgage;
  • is up-to-date with the mortgage payments;
  • does not want to borrow more, other than to finance any relevant product fee or arrangement fee for that mortgage;
  • is looking to switch to a new mortgage deal on the current property.

A lender must not enter into a new contract unless they can demonstrate that the new mortgage is more affordable than the last one. 

The current rules, introduced in the Mortgage Market Review, mean that a sale must include an affordability assessment unless it is a product switch with the existing lender and there is no additional borrowing. 

The new rules above will mean that a modified affordability assessment can be carried out when switching lenders – remember it will still be the responsibility of the lender to assess affordability. 

The FCA has set up an implementation group of trade associations to:

  • enable market-readiness for using proposed responsible lending changes;
  • promote the availability of switching options for certain consumers.

One of the outcomes from the first meeting is that the FCA confirmed that the amended affordability assessment can be used where the new mortgage is to consolidate first charge and second charge mortgages.

Also discussed was whether it was clear how ‘more affordable’ would be assessed for new mortgage products with a discount variable rate. 

The FCA intends to publish the full policy statement in late 2019 that will hopefully answer the point above.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

All reasonable attempts to make the customer experience easier are welcome.

Action Required By You

  • Keep an eye open for further articles; 
  • Contact ATEB if you need further clarification or assistance.
SUIT - Beautiful Reports
CREATE BEAUTIFUL
SUITABILITY
REPORTS
SUIT - Complete Control
TAKE BACK
CONTROL OF YOUR
SUITABILITY REPORT
PRODUCTION
SUIT - Comp confidence
SUITABILITY
REPORTS
WITH FULL
COMPLIANCE
CONFIDENCE
COMP - Hands on
HANDS-ON COMPLIANCE
Helping you to implement solutions
COMP - File checking
FILE CHECKING
All business cases checked, including DB transfers
COMP -166
Section 166 and
Regulatory Reviews
Extensive S166 experience
COMP -healthchecks
Audits and
Health Checks
Need a regulatory check-up?
COMP -166
E-COMPLIANCE
A lighter touch support service
COMP -166
FCA Applications
We have completed hundreds
of Part IV applications
previous arrow
next arrow

About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

Contact Us

Brought to you by

Explore more articles in this category

Other articles that you might be interested in