MCOB 5.6 Content of illustrations

An illustration provided to a customer must:

1. (1)

   contain the material set out in MCOB 5 Annex 1 in the order and using the numbered section headings, sub-headings and prescribed text in MCOB 5 Annex 1, except where provided for in MCOB 5.6;

2. (2)

   follow the layout of the template in MCOB 5 Annex 1 with:

   1. (a)

      prominent use of the Key facts3 logo followed by the text 'about this mortgage';

      33
   2. (b)

      each section clearly separated;

   3. (c)

      all the amounts to be paid in Sections 5, 6, 8 and 9 in columns that make the amounts of the payments clear; and

   4. (d)

      no section split across different pages except where it is impractical not to do so;

3. (3)

   use font sizes and typefaces consistently throughout the illustration which are sufficiently legible so that the illustration can be read easily by a typical customer;

4. (4)

   ensure that the information within each section is clearly laid out (for example, through the use of bullet points or similar devices to separate information);

5. (5)

   include prominent headings with the numbered section headings clearly differentiated in some way from the other text in the illustration (for example, through the use of larger and more prominent fonts, the use of shading or colour);

6. (6)

   replace '[name of mortgage lender]' with the name of the mortgage lender providing the regulated mortgage contract: a trading name used by the mortgage lender may be stated, as long as the name of the mortgage lender is also disclosed in Section 4 of the illustration in accordance with MCOB 5.6.25 R(1);

7. (7)

   describe any early repayment charge as an 'early repayment charge' and not use any other expression to describe such charges; and

8. (8)

   describe any higher lending charge as a 'higher lending charge' and not use any other expression to describe such charges.

Section 13 in MCOB 5 Annex 1 is required only where the illustration is provided to the customer by, or on behalf of, a mortgage intermediary. If this is not the case, Section 14 must be renumbered Section 13.

The illustration provided to customers must:

1. (1)

   contain only the material prescribed in MCOB 5.6 and no other material except where provided for elsewhere in MCOB 5.6; and

2. (2)

   be in a document separate from any other material that is provided to the customer.

As a minimum the illustration must be personalised to reflect the following requirements of the customer:

1. (1)

   the specific regulated mortgage contract in which the customer is interested;

2. (2)

   the amount of the loan required;

3. (3)

   the price or value of the property on which the regulated mortgage contract would be secured (estimated where necessary);

4. (4)

   the term of the

   regulated mortgage contract (where the customer is unable to suggest a date at which he expects to repay the loan, for example in the case of an open-ended secured bridging loan, secured overdraft or mortgage credit card, then a term of 12 months must be assumed and this assumption stated); and

5. (5)

   whether the regulated mortgage contract is to be an interest-only mortgage or a repayment mortgage or a combination of the two.

The amount referred to in MCOB 5.6.6 R(2) is:

1. (1)

   in cases where on the basis of the information obtained from the customer before providing the illustration it is clear that the customer would not be eligible to borrow the amount he requested, an estimate of the amount that the customer could borrow based on the information obtained from the customer; or

2. (2)

   where the regulated mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card:4

   1. (a)

      (if it provides for an initial drawdown and linked borrowing facilities that would allow the customer to increase the amount of the loan without any further approval from the mortgage lender) the amount of the initial drawdown; or4

   2. (b)

      (in all other cases) 4the total borrowing that the firm is willing to provide under the regulated mortgage contract; or

3. (3)

   where it is known that the loan will be released in instalments, for example in the case of a self-build mortgage, the total amount of the loan required and not the amount of the initial instalment.

Where the illustration relates to a regulated mortgage contract that is sub-divided into different parts with different types of interest rate or different rates of interest or different conditions, or a combination of these, the requirements in MCOB 5.6 may be adapted to accommodate this. The adaptations made must be limited to those that are necessary.

At the head of the illustration, the following information must be included:

1. (1)

   the customer's name;

2. (2)

   the date of issue of the illustration;

3. (3)

   details of how long the illustration is valid and whether there is any date by which the regulated mortgage contract covered by the illustration needs to commence (for example, where a fixed interest rate is only available if the regulated mortgage contract commences before a certain date); and

4. (4)

   the prescribed text at the head of the illustration in MCOB 5 Annex 1.

Under the section heading 'About this illustration', the prescribed text in MCOB 5 Annex 1 under this heading must be included.

1. (1)

   Unless (2) applies, under the section heading 'Which service are we providing you with?' the prescribed text in MCOB 5 Annex 1 under this heading must be included, with a 'check box' for each statement, one of which must be marked prominently to indicate the level of service provided to the customer.

2. (2)

   If the level of service described in the illustration is provided by another firm, (1) may be replaced by the following:Under the section heading 'Which service are we providing you with?' the following text should be presented as two options, with a 'check box' for each option, one of which must be marked prominently to indicate the level of service provided to the customer:'[name of firm] recommends, having assessed your needs, that you take out this mortgage.[name of firm] is not recommending a particular mortgage for you. However, based on your answers to some questions, it is giving you information about this mortgage so that you can make your own choice'.

1. (1)

   Under the section heading 'What you have told us', the illustration must state the information that has been obtained from the customer under MCOB 5.6.6 R (apart from MCOB 5.6.6 R(1) which is provided for in Section 4 of the illustration), and can include brief details of any other information that has been obtained from the customer and used to produce the illustration.

2. (2)

   If the amount on which the illustration is based includes the amount that the customer wants to borrow plus charges and other payments that have been added to the loan:

   1. (a)

      except where (b) applies, this section must include the following text after the loan amount from MCOB 5.6.6 R(2):'plus £[insert total amount of fees and other charges added to the loan] for fees that will be added to the loan - see Section 8 for details.'; or

   2. (b)

      where there are other fees or charges that the customer must pay that have not been added to the loan, this section must include the following text after the loan amount from MCOB 5.6.6 R(2):'plus £[insert total amount of fees and other charges added to the loan] for fees that will be added to the loan. These and the additional fees that you need to pay are shown in Section 8.'

3. (3)

   If the amount on which the illustration is based includes the amount that the customer wants to borrow plus insurance premiums or insurance-related charges (other than a higher lending charge) that have been added to the loan:12

   1. (a)

      except where (b) applies, this section must include the following text after the loan amount from MCOB 5.6.6 R(2) (which may be combined with the prescribed text in (2) if applicable): 'plus £[insert amount of premium or charges, or both, to be added to the loan] for insurance [premiums] [and] [charges] that will be added to the loan - see Section 9 for details.'; or 2

   2. (b)

      2 where there are other insurance premiums or insurance-related charges, or both, that the customer must pay that have not been added to the loan, this section must include the following text after the loan amount from MCOB 5.6.6 R(2) (which may be combined with the prescribed text in (2) if applicable):'plus £[insert amount of premium or charges, or both, to be added to the loan] for insurance [premiums] [and] [charges] that will be added to the loan. These and any additional insurance [premiums] [and] [charges] that you need to pay are shown in Section 9.'2

4. (4)

   If the amount on which the illustration is based does not involve any charges or payments being added to the amount to be borrowed, but there are charges that must be paid by the customer, Section 3 of the illustration must include the following text after the loan amount from MCOB 5.6.6 R(2): 'No fees have been added to this amount but the fees you need to pay are shown in Section 8. For details of any insurance charges, see Section 9.'2

5. (5)

   If the regulated mortgage contract on which the illustration is based has no charges that must be paid by the customer, and no insurance premiums are being added to the loan, Section 3 of the illustration must include the following text after the loan amount from MCOB 5.6.6 R(2):2

   'We do not charge any fees for this mortgage.'

Where the same illustration covers a regulated mortgage contract that is a combination of a repayment mortgage and an interest-only mortgage, either:

1. (1)

   Section 3 of the illustration must state the amount the customer wishes to borrow as a repayment mortgage and the amount required as an interest-only mortgage; or

2. (2)

   Section 3 of the illustration must summarise the repayment method as partly an interest-only mortgage and partly a repayment mortgage, and Section 4 of the illustration must state the amount the customer wishes to borrow as a repayment mortgage and the amount required as an interest-only mortgage.

Where the same illustration covers a regulated mortgage contract that has different parts of the loan over a different term (that is, the final repayment date of the loan parts are different), either:

1. (1)

   Section 3 of the illustration must state the amount repayable over each term; or

2. (2)

   Section 3 of the illustration must state the longest term that applies and Section 4 of the illustration must state the amount repayable over each term.

For the purpose of illustrating to the customer the repayment method in Section 3 or Section 4 of the illustration, or the cost of the regulated mortgage contract in Section 5 of the illustration, if the illustration covers a regulated mortgage contract that is a combination of more than one interest-only part on the same product terms but with different repayment dates, the illustration must either treat it as one part by assuming the longest term, or alternatively treat it as a multi-part loan.

At the end of Section 3 of the illustration a statement must be included making clear that changes to any of the information obtained from the customer, and where appropriate to the valuation of the property, could alter the details elsewhere in the illustration, and encouraging the customer to ask for a revised illustration in this event.

Under the section heading 'Description of this mortgage' the illustration must:

1. (1)

   state the name of the mortgage lender providing the regulated mortgage contract to which the illustration relates (a trading name used by the mortgage lender may also be stated in accordance with MCOB 5.6.2 R(6)), and the name, if any, used to market the regulated mortgage contract;

2. (2)
   1. (a)

      provide a description of the interest rate type and rate of interest that applies in accordance with the format described in MCOB 5.6.26 R and MCOB 5.6.27 R;

   2. (b)

      where there is more than one interest rate type or rate of interest, specify the amount of the loan to which each interest rate type and rate of interest applies;

   3. (c)

      unless the interest rate applies for the full term of the loan, confirm what interest rate will apply, when it will apply and for how long it will apply after any initial interest rate ends, in accordance with the format described in MCOB 5.6.26 R and MCOB 5.6.27 R; and

   4. (d)

      provide a clear explanation of the charging approach where different interest rates are applied to different items of debt (for example, for a mortgage credit card where a different interest rate applies to balances that are transferred from that charged on any additional borrowing);

3. (3)

   where MCOB 5.6.20 R(2) applies, state the different amounts repayable and the different terms over which the amounts are repayable;

4. (4)

   where MCOB 5.6.19 R(2) applies, state the amount repayable under an interest-only mortgage and the amount repayable under a repayment mortgage;

5. (5)

   include the following text if the regulated mortgage contract meets the Government's mortgage CAT standards:'This mortgage meets the Government's CAT standards.';

   7
6. (6)

   if the customer is obliged to buy any tied products or to take out a linked current account, a linked savings account or any linked borrowing under the regulated mortgage contract, include:

   1. (a)

      details of the products required; and

   2. (b)

      the following text: 'You are obliged to take out [insert details of the product(s)] through [insert name of mortgage lender or if relevant, name of mortgage intermediary] as a condition of this mortgage. Please refer to Section [insert applicable section number e.g. 6 or 9] of this illustration for further details.'

7. (7)

   state very briefly any restrictions that apply to the availability of the regulated mortgage contract (for example, if it is only available to certain types of customer or for certain types of loan);

8. (8)

   where the interest rate, payments or terms and conditions of the regulated mortgage contract in the illustration reflect a customer's adverse credit history, include the following text: 'The terms of this mortgage reflect past or present financial difficulties.'; and

9. (9)

   where the intention of the regulated mortgage contract is solely to provide the customer with a mortgage credit card (rather than the mortgage credit card being an additional feature of a regulated mortgage contract) include the warning about the loss of statutory rights from MCOB 5.6.102 R(2) in Section 4 of the illustration rather than Section 12.

MCOB 5.6.27 R sets out some examples of descriptions of interest rate types and rates of interest which must be used in the illustration to comply with MCOB 5.6.25 R(2). If an interest rate is not described in MCOB 5.6.27 R, it must be presented in the illustration in a way that is consistent with the descriptions in MCOB 5.6.27 R.

Where the loan under the regulated mortgage contract is divided into more than one part (for example where part of the loan is a fixed interest rate and part of the loan is a discounted variable interest rate) and the firm displays this in a tabular format in the illustration:

1. (1)

   the following text must be used to introduce the table 'As this mortgage is made up of more than one part, these parts are summarised below:';

2. (2)

   each part must be numbered for ease of reference in the illustration;

3. (3)

   the 'initial rate payable' must be displayed separately from the interest rate description;

4. (4)

   the loan amounts must be totalled; and

5. (5)

   immediately following the table, a statement of what interest rates will apply to each part, (and when they will apply) after any initial interest rate ends in accordance with MCOB 5.6.25 R(2)(c).

Further information about the regulated mortgage contract may be included in Section 4 of the illustration as long as it does not significantly:

1. (1)

   duplicate information contained elsewhere in the illustration; and

2. (2)

   extend the length of this section.

Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has an agreed term for repayment and a regular payment plan (that is, it is not a revolving credit agreement such as a secured overdraft or mortgage credit card, or a regulated mortgage contract where all of the interest rolls up, such as an open-ended bridging loan):

1. (1)

   the following text must be included in the illustration: 'The overall cost takes into account the payments in Sections 6 and 8 below.';

2. (2)

   if all of the regulated mortgage contract to which the illustration relates is an interest-only mortgage, the following text must follow the text in (1):'However, it excludes any payments that you may need to make into a separate savings plan, to build up a lump sum to repay the amount borrowed, but assumes that you pay off the amount borrowed as a lump sum at the end of the mortgage.';

3. (3)

   where all of the regulated mortgage contract is a repayment mortgage, the following text must follow the text in (1):'With a repayment mortgage you gradually pay off the amount you have borrowed, as well as the interest, over the life of the mortgage.';

4. (4)

   if part of the regulated mortgage contract to which the illustration relates is an interest-only mortgage, and part is a repayment mortgage, the following text must follow the text in (1):'However, it excludes any payments that you may need to make into a separate savings plan to build up a lump sum to repay the amount borrowed on an interest-only basis, but assumes that you pay off the amount borrowed on an interest-only basis, as a lump sum at the end of the mortgage.'; and

5. (5)

   reference must be made to any other payments that have been included in the APR but not included in Sections 6 and 8 of the illustration if these are relevant to the regulated mortgage contract that is the subject of the illustration.

Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has no agreed term for repayment, (and a 12 month term has been assumed), or no regular payment plan, or both (for example, a revolving credit agreement such as a secured overdraft or mortgage credit card or a regulated mortgage contract where all the interest rolls up such as an open-ended bridging loan):

1. (1)

   the following text must be included in the illustration: 'The overall cost takes into account the payments in Sections 6 and 8 below.';

2. (2)

   where all the interest on the regulated mortgage contract rolls up and is repaid as a lump sum at the end of the regulated mortgage contract, for example a secured bridging loan, then the following text must follow the text in (1): 'It assumes that you pay back the total amount owing as a lump sum at the end of the mortgage term.';

3. (3)

   where the regulated mortgage contract is a revolving credit agreement and no regular payments are made, for example a secured overdraft, then the following text must follow the text in (1):'It assumes that you borrow the maximum amount available, and pay back the total amount owing, as a lump sum at the end of the mortgage term.';

4. (4)

   where the regulated mortgage contract is a revolving credit agreement and regular minimum payments are made, for example, a mortgage credit card, then the following text must follow the text in (1): 'It assumes that you borrow the maximum amount available, make regular payments of the minimum amount, and pay back the remaining amount owing as a lump sum at the end of the mortgage term.'; and

5. (5)

   reference must be made to any other payments that have been included in the APR but not included in Sections 6 and 8 of the illustration if these are relevant to the regulated mortgage contract that is the subject of the illustration.

The following text must be included after the text required by MCOB 5.6.31 R or MCOB 5.6.32 R with the relevant cost measures shown in the right-hand column of Section 5 in accordance with the layout shown in MCOB 5 Annex 1:

1. (1)

   'The total amount you must pay back, including the amount borrowed is £[insert total amount payable]';

2. (2)

   'This means you pay back £[insert the total amount payable] divided by the amount on which the illustration is based from MCOB 5.6.6 R(2) plus all fees, charges and insurance premiums added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3)] for every £1 borrowed'; and1

3. (3)

   'The overall cost for comparison is [insert the APR]% APR'.

1. (1)

   The APR and the total amount payable in MCOB 5.6.34 R must be calculated on the basis of information obtained from the customer under MCOB 5.6.6 R.

2. (2)

   Where there is a charge to be included in the APR and total amount payable and the precise amount of that charge is not known at the time that the illustration is provided, MCOB 10.3 (Formula for calculating the APR) sets out a number of relevant assumptions to be used. If the method for including the charge is not addressed in MCOB 10 (Annual Percentage Rate), the charge must be estimated based on information which is known to be representative of the regulated mortgage contract to which the illustration relates.

3. (3)

   1[deleted]

4. (4)

   Where the regulated mortgage contract is a revolving credit agreement and regular payments are made, for example, a mortgage credit card, then the APR and total amount payable must be based on the maximum amount that the customer could borrow and take into account any amounts that must be paid in regular instalments.

At the end of Section 5 of the illustration the following text must be included:

1. (1)

   unless the interest rate is fixed throughout the term of the regulated mortgage contract:'The figures in this section will vary following interest rate changes and if you do not keep the mortgage for [insert term from MCOB 5.6.6 R(4)].'; and

2. (2)
   1. (a)

      where the regulated mortgage contract is a repayment mortgage:'Only use the figures in this section to compare the cost with another repayment mortgage.'; or

   2. (b)

      where the regulated mortgage contract is an interest-only mortgage:'Only use the figures in this section to compare the cost with another interest-only mortgage.'; or

   3. (c)

      where the regulated mortgage contract is a combination of a repayment mortgage and an interest-only mortgage:'Only use the figures in this section to compare the cost with another mortgage that has the same proportions of the loan on repayment and interest-only as this one.'

MCOB 5.6.40 R to MCOB 5.6.57 G do not apply to loans without a term or regular payment plan where some or all of the interest rolls up, for example secured bridging loans, secured overdrafts or mortgage credit cards. In these cases, MCOB 5.6.134 R to MCOB 5.6.138 G apply.

The heading for Section 6 of the illustration and the heading of the column on the right-hand side of this section must state the frequency with which payments must be made by the customer. (For example, if payments are to be made on a monthly basis, the heading for this section must be 'What you will need to pay each month' and the column must be headed 'Monthly payments'.)

All the payments in Section 6 of the illustration must be calculated based on the frequency used for the purposes of the headings in MCOB 5.6.40 R and must be shown in the column on the right-hand side of this section.

Section 6 of the illustration must contain the following information:

1. (1)

   the loan amount on which the illustration is based. This figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the [fees] [and] [insurance premiums] that are shown in [Section 8] [and] [Section 9] as being added to your mortgage.'

2. (2)

   the assumed start date that has been used in the illustration to estimate the number of payments to be charged at given interest rates;2

3. (3)

   except where MCOB 5.6.54 R applies, for each of the interest rates charged on the regulated mortgage contract:

   1. (a)

      the number of payments at that interest rate;

   2. (b)

      whether the interest rate is fixed or variable;

   3. (c)

      the interest rate charged on the regulated mortgage contract at the time the illustration is issued; and

   4. (d)

      the amount that the customer must pay in each instalment at that interest rate, which must be recorded in the right-hand column of this section (see MCOB 5.6.48 R).

Where the illustration covers a regulated mortgage contract that automatically converts from one repayment method to another after a specified period, then the illustration must show the effect of this change on the regular payment, in the same way as the requirements in MCOB 5.6.42 R(3).

The following information must be included in the description of the interest rate required by MCOB 5.6.42 R(3)(c) except where MCOB 5.6.54 R applies:

1. (1)

   where the interest rate can change, the word 'currently' must be used to illustrate the current interest rate payable; and

2. (2)

   where the interest rate changes after a given period the words 'followed by' must be used to indicate this.

The information required by MCOB 5.6.42 R(3)(d) must exclude:

1. (1)

   the cost of repaying the capital if the regulated mortgage contract is an interest-only mortgage: where part of the regulated mortgage contract is an interest-only mortgage, the cost of repaying the capital must be excluded only for that part; and

2. (2)

   the cost of any products which may be sold in conjunction with the regulated mortgage contract (whether tied products or not), unless the cost has been added to the mortgage.

If, because of the assumed start date of the regulated mortgage contract, the initial payment differs from the subsequent payments, the initial payment must be shown in this section in accordance with MCOB 5.6.42 R(3)(d).

Where the illustration covers a regulated mortgage contract that is a combination of a repayment mortgage and an interest-only mortgage, the payment amounts in MCOB 5.6.42 R(3)(d) must be the combination of the amount to be paid on the repayment mortgage and the amount to be paid on the interest-only mortgage, unless MCOB 5.6.13 R or MCOB 5.6.54 R apply in which case they must be stated separately.

Where the interest is deferred on the regulated mortgage contract, the following text must be included under the information on the deferred interest rate included in the illustration in accordance with MCOB 5.6.42 R(3):'"The interest deferred will be added to your mortgage. The table at Section [insert 6a or 6b if MCOB 5.6.55 R applies] of this illustration shows how this will affect the amount you owe.'

Where all or part of the regulated mortgage contract to which the illustration relates is an interest-only mortgage:

1. (1)

   the illustration must include the sub-heading 'Cost of repaying the capital' with the following text under it:'You will still owe [insert amount of loan on an interest-only basis] at the end of the mortgage term. You will need to make separate arrangements to repay this. When comparing the payments on this mortgage with a repayment mortgage, remember to add any money that you may need to pay into a separate savings plan to build up a lump sum to repay this amount.';

2. (2)

   if the regulated mortgage contract requires the customer to take out a repayment vehicle that is a tied product either through the mortgage lender or mortgage intermediary then:

   1. (a)

      include a sub-heading 'Savings plan that you must take out through [insert name of mortgage lender or mortgage intermediary]';

   2. (b)

      include an accurate quotation or a reasonable estimate of the payments the customer will need to make for the repayment vehicle; and

   3. (c)

      if a quotation cannot be provided under (b), state that a quotation is not available at present, that a quotation will be provided as soon as possible and that in the event that this is provided after an application is made, and is found to be unacceptable to the customer, that the application may be cancelled with a full refund of all fees (in accordance with MCOB 5.4.23 R(3)).

3. (3)

   if the illustration includes a quotation for the payments that would need to be made into the repayment vehicle by the customer:

   1. (a)

      unless (2) applies, the illustration must include the sub-heading 'Savings plan that you do not have to take out through [insert name of mortgage lender or mortgage intermediary]';

   2. (b)

      the illustration must provide a brief description only of the type of repayment vehicle illustrated (full details of the repayment vehicle may be provided separately);

   3. (c)

      the quotation must be based on the frequency of payments in MCOB 5.6.40 R and must be included in the column for payments alongside the description required by (b); and

   4. (d)

      the illustration must refer the customer to the individual product disclosure documentation required by the Conduct of Business sourcebook (COBS).5

      5
4. (4)

   if a quotation for the repayment vehicle is not provided in the illustration, the illustration must include a '£' sign in the column for payments alongside the following text, which follows the text in (1):'When you have found out what payments you need to make into a savings plan you may find it helpful to add these to your mortgage payments and put the total payment in the column opposite.';

5. (5)

   unless MCOB 5.6.55 R applies, if a quotation for the repayment vehicle has been included in the illustration, Section 6 must be extended to illustrate the monthly cost inclusive of the savings plan and must have the sub-heading 'What you will need to pay each [insert frequency of payments from MCOB 5.6.40 R] including the cost of a savings plan to repay the capital' and must include:

   1. (a)

      the information required by MCOB 5.6.42 R(3) for each interest rate charged on the regulated mortgage contract; and

   2. (b)

      the sum of what the customer would need to pay in each instalment for the regulated mortgage contract and for the repayment vehicle in the payments column. For example if payments are made monthly, this would be the amount that the customer would need to pay each month for the regulated mortgage contract and the repayment vehicle. Where different interest rates are charged on the regulated mortgage contract the amount payable in each instalment at each interest rate must be shown in the payments column.

Where the loan under the regulated mortgage contract is divided into more than one part (for example, where part of the loan is on a fixed interest rate and part on a discounted variable interest rate) and the firm displays the initial cost of all parts, and the total cost, in a tabular format in the illustration, MCOB 5.6.42 R(3) and MCOB 5.6.46 R do not apply; instead:

1. (1)

   each part must be numbered for ease of reference in the illustration;

2. (2)

   the loan amounts must be totalled;

3. (3)

   the number and frequency of each payment must be stated;

4. (4)

   the repayment method for each part must be stated;

5. (5)

   the 'initial interest rate payable' for each part must be stated ;

6. (6)

   whether the interest rate payable is fixed or variable for each part must be stated; and

7. (7)

   the regular payment for each part must be stated and the total payment for all parts highlighted (excluding the information listed in MCOB 5.6.48 R).

Unless all of the interest rates described in MCOB 5.6.54 R(5) apply for the term of the loan part to which they apply, then an additional section numbered as 6a and titled 'What you will need to pay in future' must be included to indicate the future stepped payments (if MCOB 5.6.51 R also applies then the section on deferred interest must be numbered 6b). This section must:

1. (1)

   state when a change in payment will occur;

2. (2)

   state the reason for the change in payment; and

3. (3)

   confirm that the payment illustrated assumes interest rates will not change.

Where MCOB 5.6.55 R applies and part of the regulated mortgage contract is an interest-only mortgage:

1. (1)

   if a quotation for the repayment vehicle has been included in the illustration in accordance with MCOB 5.6.52 R(3) then MCOB 5.6.52 R(5) does not apply.

2. (2)

   a statement is required to indicate that these payments do not include the cost of any savings plan.

MCOB 5.6.59 R to MCOB 5.6.65 R do not apply to loans without a term or regular repayment plan where some or all of the interest rolls up, for example, secured bridging loans, secured overdrafts or mortgage credit cards. In these cases MCOB 5.6.140 R to MCOB 5.6.145 R apply.

Under the section heading 'Are you comfortable with the risks?':

1. (1)

   under the sub-heading 'What if interest rates go up?' the illustration must include the following:

   1. (a)

      if the interest rate is fixed throughout the term of the regulated mortgage contract, an explanation that the payments will not vary because the interest rate is fixed;

   2. (b)

      if the interest rate is fixed for part of the term of the regulated mortgage contract, an explanation of when or how increases in the interest rate charged on the regulated mortgage contract affect the customer's payments;

   3. (c)

      if the interest rate cannot go above a certain level or below a certain level, or both, and this applies throughout the term of the regulated mortgage contract, an explanation that this is the case;

   4. (d)

      if the interest rate cannot go above or below a certain level for part of the term of the regulated mortgage contract, an explanation that this is the case and of when or how increases in the interest rate charged on the regulated mortgage contract affect the customer's payments;

   5. (e)
      1. (i)

         if (c) or (d) apply, the maximum or minimum interest rate, or both, and the payments at each of these interest rates; and

      2. (ii)

         where a repayment vehicle has been included in the illustration in accordance with MCOB 5.6.52 R(3), the payments quoted in (i) must include the cost of the repayment vehicle and state that this is the case;

   6. (f)

      if the regulated mortgage contract is made up of a number of different parts including different types of interest rate and different rates of interest, an explanation of when or how increases in the interest rate charged on the regulated mortgage contract affect the customer's payments for each part (or combination of parts);

   7. (g)

      except where (2)(a) or (2)(b) apply, the following text:'The [frequency of payments from MCOB 5.6.40 R] payments shown in this illustration could be considerably different if interest rates change. For example, for one percentage point increase in [describe the interest rate that applies], your [insert frequency of payments] payment will increase by around £[insert amount by which payment will increase]'; and

   8. (h)

      except where (2)(a) or (2)(b) apply, if (f) applies the following additional text after the text in (g), for each part (or combination of parts), where the amounts by which the customer's payments would increase are different:'After the [describe the interest rate that applies, the part (or parts) to which it applies, and date or period for which it applies] then for one percentage point increase in [describe the interest rate that applies], your [insert frequency of payments] payment will increase by around £[insert amount by which payment will increase].'.

2. (2)

   paragraphs (1)(g) and (1)(h) do not apply where:

   1. (a)

      the interest rate is fixed throughout the term of the regulated mortgage contract; or1

   2. (b)

      the difference between the interest rate included in the illustration in accordance with MCOB 5.6.42 R and the maximum interest rate that can be charged on the regulated mortgage contract is less than one percentage point.

3. (3)

   under the sub-heading 'What if your income goes down?': 'You will still have to pay your mortgage if you lose your job or if illness prevents you from working. Think about whether you could do this.'

The amount by which the customer's payments would increase in accordance with MCOB 5.6.59 R(1)(g) and (h) must be calculated as follows:

1. (1)

   the firm must use the total amount borrowed, or assume that all payments due on the regulated mortgage contract have actually been paid, all additional fees and payments due have been paid, and no underpayments or overpayments have been made;

2. (2)

   where all or part of the regulated mortgage contract is a repayment mortgage, the calculation must be based on:

   1. (a)

      the total amount borrowed; or

   2. (b)

      the amount of the loan outstanding from the earliest point at which the interest rate charged on the regulated mortgage contract can vary (for example, if the regulated mortgage contract has an initial fixed interest rate, this will be from the point at which the fixed interest rate ends); and

3. (3)

   the interest rate from which the increase is calculated must be the variable interest rate charged on the regulated mortgage contract at the date that the illustration is issued (that is, the variable interest rate quoted in Section 4 of the illustration); where the variable interest rate changes after a set period or on a set date, it must be based on the initial variable interest rate charged on the regulated mortgage contract at the date the illustration is issued (for example, if the initial interest rate is discounted, it must be based on the discounted rate).

Unless MCOB 5.6.59 R(2)(a) or (b) apply, the following words must be prominently displayed at the end of the sub-section 'What if interest rates go up?':'Rates may increase by much more than this so make sure you can afford the [insert frequency of payments from MCOB 5.6.40 R] payment'.

The following words must be prominently displayed at the end of the sub-section 'What if your income goes down?':'Make sure you can afford your mortgage if your income falls'.

The following text must be included at the end of Section 7 'Are you comfortable with the risks?': The Money Advice Service8 information sheet "You can afford your mortgage now, but what if...?" will help you consider the risks. You can get a free copy from http://www.moneyadviceservice.org.uk,86 12or by calling 0800 138 7777.’7

Under the section heading 'What fees must you pay?' the illustration must:

1. (1)

   itemise all the fees that are included in the calculation of the APR in accordance with MCOB 10 (Annual Percentage Rate), excluding any charges for insurance set out in Section 9 in accordance with MCOB 5.6.73 R; and1

2. (2)

   include a statement at the end of the section using the following text:'You may have to pay other taxes or costs in addition to any fees shown here.'

The fees included in this section in accordance with MCOB 5.6.66 R must be itemised under the relevant sub-headings as follows:

1. (1)

   the fees that are payable by the customer to the mortgage lender must be itemised under the sub-heading 'Fees payable to [name of mortgage lender]';

2. (2)

   the remaining fees must be itemised under the sub-heading 'Other fees'; and

3. (3)
   1. (a)

      if there are no fees to be itemised in accordance with (1), the sub-heading must be retained and a statement must be included stating that no fees apply; and

   2. (b)

      if there are no fees to be itemised in accordance with (2), then the sub-heading must be retained and only the text in MCOB 5.6.66 R(2) applies.

The following information must be provided for each fee included in this section of the illustration in accordance with MCOB 5.6.66 R(1):

1. (1)

   a description of the fee;

2. (2)

   the amount payable by the customer recorded in a column headed 'Fee amount' on the right-hand side of this section;

3. (3)

   for fees included under the sub-heading 'Other fees', to whom the fee is payable;

4. (4)

   when the fee is payable;

5. (5)

   whether or not the fee is refundable, and if so, the extent to which it is refundable; and

6. (6)

   which fees (if any) are estimated in accordance with MCOB 5.6.35 R(2) and based on representative information; and

7. (7)

   if any fee is payable after the start of the regulated mortgage contract and subject to change in the future, for example a fee payable on final repayment of the regulated mortgage contract, the amount of that fee, along with a statement that this is the 'current fee'.

1. (1)

   If a higher lending charge is payable by the customer, the following text must be used to describe such a charge for the purposes of MCOB 5.6.69 R:'A higher lending charge is payable because you are borrowing [insert the ratio of the mortgage amount (from MCOB 5.6.6 R(2)) to the property's price or value (from MCOB 5.6.6 R(3))] of the property's [estimated] [price/value].'

2. (2)

   If the customer has asked for any fees to be added to the loan, this must be stated alongside each fee.2

3. (3)

   If the customer has the option of adding to the loan amount any of the fees included in this section, the following text must be included:'If you wish you can add [this/these/the {type of fee}] fee(s) to the mortgage. This would increase the amount you borrow to [insert amount of the mortgage with the fee(s) included] and would increase the payments shown in Section 6. If you want to do this, you should ask for another illustration that shows the effect of this on your [insert frequency of payments from MCOB 5.6.40 R] payments.'

4. (4)

   Any fees that are estimated based on representative information in accordance with MCOB 5.6.35 R(2) must include an appropriate explanation of what the fee represents. For example, if this section includes an estimated fee for the legal work that a customer might be charged by his conveyancer for carrying out work on behalf of the mortgage lender, the illustration must explain that the fee is estimated, and that it only covers part of the costs of legal work that the customer might need to pay.

A mortgage lender must provide a tariff of charges to the customer, if the customer so requests.

1. (1)

   Under the section heading 'Insurance' the illustration must include details of:

   1. (a)

      insurance which is a tied product; and

   2. (b)

      insurance which is required as a condition of the regulated mortgage contract which is not a tied product.

2. (2)

   A firm may also provide details of insurance which it is optional for the customer to take out under this section heading.

3. (3)

   It must be clear to the customer which products he is required to purchase under which circumstances (for example, where both a tied product and a mortgage intermediary are involved, whether the policy must be purchased from the mortgage lender or the mortgage intermediary).

Under the sub-heading 'Insurance you must take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]' the following information must be included if the regulated mortgage contract requires the customer to take out insurance that is a tied product either through the mortgage lender or where relevant the mortgage intermediary:

1. (1)

   details of which insurance is a tied product;

2. (2)

   for how long the customer is obliged to purchase the insurance;

3. (3)

   an accurate quotation or a reasonable estimate of any payments the customer needs to make for the insurance;

4. (4)

   where a quotation is provided for insurance in accordance with (3) on the basis of an estimated sum insured, because the actual required sum insured is unknown, the fact that it is estimated should be stated along with confirmation of the level of cover that has been assumed;

5. (5)

   details of when the customer's payments for such insurance change, for example, if premiums are reviewed annually; and

6. (6)

   where a quotation is not provided in accordance with (3) a statement of when and how a quotation will be provided (for example, separately and as soon as possible).

If the regulated mortgage contract does not require the customer to take out insurance as a tied product, the sub-heading 'Insurance you must take out through [insert the name of the mortgage lender, and where relevant the name of the mortgage intermediary]' must be retained and a statement must be provided under this heading that the customer is not obliged to take out any insurance through the mortgage lender or, where relevant, the mortgage intermediary.

The following information must be included under the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert the name of the mortgage lender, or where relevant the name of the mortgage intermediary, or both]':

1. (1)

   if the regulated mortgage contract requires the customer to take out an insurance policy (other than that which is a tied product which the customer is obliged to purchase through the mortgage lender, or where relevant the mortgage intermediary), a brief statement of the type of insurance the firm requires; a quotation for the insurance that the firm issuing the illustration wishes to promote to the customer may be included in the illustration (estimated where necessary);

2. (2)

   if the mortgage lender or the mortgage intermediary makes a charge in cases where the customer does not arrange insurance that is a condition of the regulated mortgage contract through the mortgage lender or the mortgage intermediary, this must be stated, together with the amount of the charge and the frequency with which this charge is payable; and

3. (3)

   if no insurance policies are required (other than that which is a tied product), the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name(s) of mortgage lender and, where relevant the mortgage intermediary]' must be retained in the illustration and a statement must be provided under this heading that no such insurance is required.1

A firm may include in the illustration, under the sub-heading 'Optional insurance', quotations (estimated where necessary) for any insurance products (other than the insurance products covered elsewhere in the illustration in accordance with MCOB 5.6.74 R and MCOB 5.6.77 R) that the firm issuing the illustration wishes to promote to the customer.

If no quotations are included in the illustration in accordance with MCOB 5.6.80 R, the sub-heading 'Optional insurance' must not be included in the illustration.

1. (1)

   If any quotations for insurance are included in the illustration in accordance with MCOB 5.6.74 R(3), MCOB 5.6.77 R(1) or MCOB 5.6.80 R, the illustration:

   1. (a)

      must include a brief description only of the type of insurance (full details of the insurance cover may however be provided separately); and

   2. (b)
      1. (i)

         must include the total price to be paid by the customer in a column on the right hand side of the illustration under the heading '[insert frequency of payments quoted] payments'; and

      2. (ii)

         may refer the customer to the individual insurance product disclosure documentation.

2. (2)

   If the customer has asked to add any insurance premiums or insurance-related charges to the amount borrowed in accordance with MCOB 5.6.18 R(3), the illustration must state that this is the case.2

Under the heading 'What happens if you do not want this mortgage any more?', the illustration must include the following information on the regulated mortgage contract:

1. (1)

   under the sub-heading 'Early repayment charges':

   1. (a)

      an explanation that the customer cannot repay the regulated mortgage contract early, if this is the case;

   2. (b)

      an explanation of whether early repayment charges are payable;

   3. (c)

      an explanation of when early repayment charges are payable;

   4. (d)

      an explanation of any other fees that are payable if the regulated mortgage contract is repaid early, and the current level of these fees;

   5. (e)

      a basic explanation of the basis on which early repayment charges are calculated (for example, as a percentage of the loan or as so many months' interest), including where appropriate details of any cashback or other incentives that must be repaid. The illustration may refer to a separate document for full details of all terms and conditions relating to the charges that apply if the regulated mortgage contract is repaid early;

   6. (f)

      example cash amounts of any early repayment charges indicating the range of charges that apply over the period during which such charges apply calculated in accordance with MCOB 5.6.88 R, which must be described in the illustration as cash examples;

   7. (g)

      the maximum early repayment charge that the customer could be charged in accordance with MCOB 12.3 (Early repayment charges), plus the cost of any other fees, which must be shown as cash amounts and described in the illustration as 'the maximum charge you could pay' [add if applicable, 'plus (a) fee(s) which (is/are) currently £x']; and

2. (2)

   under the sub-heading 'What happens if you move house?':details of whether or not the regulated mortgage contract is portable on moving house and a brief explanation of any conditions or restrictions that apply including whether there are any restrictions on changing the terms of the regulated mortgage contract during the period in which any early repayment charges apply (a reference to another document may be made in order to provide the customer with further details of the conditions or restrictions).

Where MCOB 5.6.84 R(1)(f) would result in more than three cash amounts being shown in the illustration, the cash amounts shown in the illustration may be restricted to three examples. These examples must be representative of the full range of charges that apply and not be limited to the lowest charges that apply. These three examples are in addition to:

1. (1)

   any statement of the amount of any fees described in MCOB 5.6.84 R(1)(d); and

2. (2)

   the maximum early repayment charge required by MCOB 5.6.84 R(1)(g).

1. (1)

   In calculating example cash amounts in accordance with MCOB 5.6.84 R(1)(f), it must be assumed that:

   1. (a)

      the regulated mortgage contract is repaid in full;

   2. (b)

      unless the original amount borrowed is used, that all payments due on the regulated mortgage contract are actually paid;

   3. (c)

      additional fees and charges such as insurance premiums have been paid; and

   4. (d)

      no underpayments or overpayments have been made.

2. (2)

   If:

   1. (a)

      cashbacks or other incentives need to be repaid; or

   2. (b)

      fees need to be paid;

   the amounts that would need to be repaid or paid must be included in the example cash amounts.

3. (3)

   Where the calculation of the early repayment charge is based on the interest rate charged on the regulated mortgage contract or on interest rates generally, the interest rates used for the calculation of the example cash amounts must be those in force at the date that the illustration is issued to the customer.

4. (4)

   The example cash amounts must reflect the maximum charge in a particular year. Where it is possible to state exact early repayment charges (that is, where all such charges are based on the original amount borrowed), the illustration must do so.

Where the cash examples from MCOB 5.6.88 R included in the illustration would vary either if the interest rate charged on the regulated mortgage contract changed or with changes in interest rates generally, an appropriate warning that the early repayment charges may vary from the cash examples must be included in the illustration.

1. (1)

   Under the section heading 'What happens if you want to make overpayments?', the illustration must include details of any restrictions on lump sum and regular overpayments on the regulated mortgage contract, together with a statement as to whether or not the amount on which the interest charged is recalculated is reduced immediately on receipt of any lump sum or regular overpayment.

2. (2)

   Where such recalculation does not take place immediately (for example, if an annual rest method is used), then this statement must be accompanied by an explanation of when the amount on which the interest charged is recalculated is reduced following a lump sum or regular overpayment.

3. (3)

   Where early repayment charges apply, this section must not repeat the details provided in Section 10 of the illustration, but may refer to Section 10.

Under the section heading 'Additional features' the illustration must include, where relevant, details of any additional features or facilities under the various sub-headings in MCOB 5.6.94 R.

1. (1)

   If none of the features at MCOB 5.6.94 R are applicable to the regulated mortgage contract to which the illustration relates, the section headed 'Additional features' must be retained, but the sub-headings must not be included and a statement must be added to explain that there are no additional features.

2. (2)

   Only those features available on the regulated mortgage contract need be included in the illustration.

3. (3)

   If a firm provides a customer with supplementary information about any additional features or facilities over and above the information required under MCOB 5.6.92 R to MCOB 5.6.112 G, the firm may include a reference to that supplementary information in Section 12.1

The relevant sub-headings are as follows:

1. (1)

   'Underpayments';

2. (2)

   'Payment holidays';

3. (3)

   'Borrow back';

4. (4)

   'Incentives';

5. (5)

   'Additional borrowing available without further approval';

6. (6)

   'Additional secured borrowing';

7. (7)

   'Credit card';

8. (8)

   'Unsecured borrowing';

9. (9)

   'Linked current account'; and

10. (10)

    'Linked savings account'.

Under the sub-heading 'Underpayments', the illustration must include details of circumstances in which the customer can make underpayments and a brief statement of any conditions that apply.

Under the sub-heading 'Payment holidays', the illustration must include details of circumstances in which the customer can take payment holidays and a brief statement of any conditions that apply.

Under the sub-heading 'Borrow back', the illustration must include details of circumstances in which the customer can borrow back any monies overpaid and a brief statement of any conditions that apply.

Under the sub-heading 'Incentives', the illustration must include:

1. (1)

   any incentives including cashbacks; and

2. (2)

   if a cashback is provided, the amount of the cashback and details of when it is paid to the customer.

Under the sub-heading 'Additional borrowing available without further approval', the illustration must provide details of circumstances in which there are any linked borrowing facilities that would allow the customer to increase the amount of the loan on which the illustration is based without any further approval from the mortgage lender (for example, if there are additional drawdown facilities).

Under the sub-heading 'Additional secured borrowing', the illustration must provide details of circumstances in which additional secured lending is offered with the regulated mortgage contract that would allow the customer, subject to certain conditions, to increase the amount of the loan on which the illustration is based.

Under the sub-heading 'Unsecured borrowing', the illustration must provide details of circumstances in which unsecured lending is offered with the regulated mortgage contract that would allow the customer to increase the amount of the loan on which the illustration is based.

Under the sub-heading 'Credit card', the illustration must:

1. (1)

   state if a credit card is offered with the regulated mortgage contract; and

2. (2)

   if a credit card is offered and it is a mortgage credit card:

   1. (a)

      unless (b) applies, include the following text:'This card will not give you a number of the statutory rights associated with traditional credit cards. Your mortgage offer will tell you more about the differences.'; or

   2. (b)

      where the mortgage lender provides the customer with contractual rights in relation to a mortgage credit card equal to or greater than the rights that the customer would have10 under the Consumer Credit Act 1974 and CONC if the card were issued under a regulated credit agreement10, include the following text:'This card will not give you a number of the statutory rights associated with traditional credit cards. However, [insert name of mortgage lender] will ensure that you will be treated no differently from the user of a traditional credit card. Your mortgage offer will tell you more about this.'

      10

Where any of the additional features under MCOB 5.6.99 R to MCOB 5.6.102 R inclusive apply, then the following must also be stated if the amount of additional borrowing that would be available to the customer is stated in the illustration:

1. (1)

   the maximum additional amount available;

2. (2)

   if the interest rate payable on any additional borrowing is different to the interest rate in Section 4 and Section 6 of the illustration, the interest rate and the APR charged on the additional borrowing. The APR must be calculated in accordance with MCOB 10 (Annual Percentage Rate), based on the maximum amount of additional borrowing that would be permitted for the customer and the term of the loan from MCOB 5.6.6 R(4);

3. (3)

   the total resulting debt the customer could incur (including the original loan amount);

4. (4)

   (where there is a regular payment plan) the payments on this total debt based on the frequency of payments in MCOB 5.6.40 R and the current interest rate(s) applying on the date the illustration is issued;1

5. (5)

   whether this additional borrowing must be repaid in full if the original loan is repaid in full, along with details of any conditions that apply;

6. (6)

   if early repayment charges apply to the additional amount borrowed:

   1. (a)

      that early repayment charges are payable;

   2. (b)

      an explanation of when early repayment charges are payable; and

   3. (c)

      the maximum early repayment charge that the customer could be charged in accordance with MCOB 12.3 (Early repayment charges) which must be shown as a cash amount; and

7. (7)

   if it is the case, that the maximum amount of borrowing available, or the terms and conditions, may change depending on factors such as ratio of the loan amount to the property value.

Where more than one additional borrowing facility from MCOB 5.6.99 R to MCOB 5.6.102 R applies, the total debt and total payments due under all these linked borrowing facilities must be included under a separate sub-section titled 'Total additional borrowing'.1

1. (1)

   Where additional features are included in accordance with MCOB 5.6.92 R and these are credit facilities that do not meet the definition of a regulated mortgage contract or a regulated credit agreement10, the relevant parts of Section 12 of the illustration must include the following text:

   'This additional feature is not regulated by the FCA'.1

2. (2)

   Where additional features are included in accordance with MCOB 5.6.92 R and these are credit facilities that meet the definition of a regulated credit agreement10 regulated by the Consumer Credit Act 1974 and the Act10, the relevant parts of Section 12 of the illustration must include the following text 'This additional feature is regulated under the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000.10 You will receive a separate credit agreement with any offer document for this additional feature, describing the detailed terms on which this feature is available.'

   10

Where all or part of the maximum amount of additional borrowing is secured on the customer's home, a prominent warning must be included that additional borrowing increases the amount of credit secured on the customer's home.

1. (1)

   Under the sub-heading 'Linked current account', the illustration must include the following information:

   1. (a)

      whether a linked current account is a compulsory or optional product (if the current account is a compulsory product this must also be stated in Section 4 of the illustration in accordance with MCOB 5.6.25 R(6));

   2. (b)

      an explanation of the interest rates that apply under different circumstances to the linked current account, if different from the interest rate charged on the regulated mortgage contract (for example, if a different interest rate applies if the account is overdrawn); and

   3. (c)

      the firm providing the linked current account if it is not the mortgage lender.

2. (2)

   If an example to show the effect of the linked current account on the regulated mortgage contract is included in the illustration, it must be based on the actual or likely amount that the customer intends to pay into the linked current account on a regular basis and the actual or likely expenditure profile of the customer concerned.

1. (1)

   Under the sub-heading 'Linked savings account', the illustration must include the following information:

   1. (a)

      whether a linked savings account is a compulsory or optional product (if the savings account is a compulsory product this must also be stated in Section 4 of the illustration in accordance with MCOB 5.6.25 R(6));

   2. (b)

      the interest rate paid on the linked savings account if it differs from the interest rate charged on the regulated mortgage contract; and

   3. (c)

      the firm providing the linked savings account if it is not the mortgage lender.

2. (2)

   If an example to show the effect of the linked savings account on the regulated mortgage contract is included in the illustration, it must be based on the actual or likely level of relevant savings for the customer concerned.

Where the illustration is issued to a customer by, or on behalf of, a mortgage intermediary, Section 13 'Using a mortgage intermediary' must be included in the illustration and must include the following:

1. (1)

   unless MCOB 5.6.114 R applies, a clear statement of the amount payable (either directly or indirectly) by the mortgage lender to the mortgage intermediary, or to any third parties; and

2. (2)

   the name of the mortgage lender who will make the payment, the name of the mortgage intermediary and the names of any third parties who will be paid.

If the amount payable by the mortgage lender to the mortgage intermediary and to third parties is £250 or less, the mortgage intermediary need only state that the amount of the payment is 'no more than £250', unless the customer requests the actual amount.

If the mortgage intermediary will pass to the customer all or part of the amount payable to the mortgage intermediary under MCOB 5.6.113 R(1) or MCOB 5.6.114 R, that fact may be stated in this section, along with the amount payable to the customer.

If the mortgage lender will make no payment to the mortgage intermediary or any third party, this section may state that the mortgage intermediary will receive no payment.

The amount payable in MCOB 5.6.113 R(1) or MCOB 5.6.114 R must include, but is not limited to:1

1. (1)

   any procuration fee; and

2. (2)

   a cash value for any material non-cash inducements that the mortgage lender provides to a mortgage intermediary or third party, whether payable directly or indirectly.

This section must be renumbered Section 13 if the illustration is not provided by, or on behalf of, a mortgage intermediary.

Under the section heading 'Where can you get more information about mortgages?', the prescribed text under this heading in MCOB 5 Annex 1 must be included.

This section must follow the section 'Where can you get further information about mortgages?' and must include the name, address and contact point of the firm providing the illustration.

1. (1)

   4The following words must be prominently displayed in the illustration, after the contact details: 'Your home may be repossessed if you do not keep up repayments on your mortgage'.

2. (2)

   If the loan may be secured on property which is not the customer's home the statement in (1) may be amended but only to the extent necessary in order to reflect that fact.4

If the customer's liability under a regulated mortgage contract is in a currency other than sterling, MCOB 5.6 applies to the illustration for that regulated mortgage contract with the following amendments:

1. (1)

   all cash amounts must be given in the relevant currency except where otherwise required in (2)(a) and (3);

2. (2)

   the following information must be stated under Section 4 'Description of this mortgage':

   1. (a)

      the amount in sterling on which the illustration is based from MCOB 5.6.6 R(2) based on the exchange rate in (2)(b);

   2. (b)

      the exchange rate used; and

   3. (c)

      when the exchange rate quoted applied;

3. (3)

   the following text must be added at the end of Section 4 'Description of this mortgage':'This illustration is based on the sterling equivalent of [insert details from (2)(a)] based on [insert details from (2)(b)] as at [insert details from (2)(c)]. Exchange rates can vary significantly. The effect of a 5% decrease in the value of sterling to the [insert name of relevant currency] would increase your total borrowing to [insert amount to which the amount borrowed from MCOB 5.6.6 R(2) would increase in sterling]. This would increase your [insert frequency of payments from MCOB 5.6.40 R] payments by the sterling equivalent of £[insert amount in sterling].'The following information must be added to this text:

   1. (a)

      the cash amount to which the amount borrowed would increase in sterling if there was a decline of 5% in the value of sterling when compared to the relevant currency; and

   2. (b)

      the amount by which (2)(b) would increase the customer's payments based on the frequency of payments from MCOB 5.6.40 R, shown as a sterling equivalent cash amount.

The text at MCOB 5.6.124 R must be immediately followed by the following additional text, prominently displayed (see MCOB 2.2.9 G):'Changes in the exchange rate may increase the sterling equivalent of your debt.'

If the regulated mortgage contract is a shared appreciation mortgage, MCOB 5.6 applies to the illustration with the following amendments:

1. (1)

   Section 4 'Description of this mortgage' must contain the following additional information and text in this order after the details required by MCOB 5.6.25 R to MCOB 5.6.29 R:

   1. (a)

      'This mortgage involves [name of mortgage lender] taking a percentage share in any increase in the value of your property [insert details of all occasions when the share will be payable to the mortgage lender, for example, "after x years, or when this mortgage comes to an end or is terminated early"]. The amount [name of mortgage lender] will take depends on any increase in the value of your property.' [Include if relevant: 'If your property falls in value between now and the end of this mortgage you will be required to pay [add details of what the customer will need to pay the mortgage lender if the property falls in value.]';

   2. (b)
      1. (i)

         a basic explanation of how the amount of the share payable to the mortgage lender is calculated including the proportions of any given increase in the value of the property and whether this is dependent on the level of growth (for example, that the share payable to the mortgage lender is all of the increase in value of the property for the first 5% increase in value, plus half of the additional increase in the value of the property above this);

      2. (ii)

         a reference to a separate document for full details of the terms and conditions relating to the amount of the share payable followed by:'The example below shows how this works.EXAMPLE: Based on the current [estimated] value of your property of [insert details from MCOB 5.6.6 R(3)], the example(s) below show(s) what your property value would be and what share of that value [name of mortgage lender] would take after [insert term of the loan in accordance with MCOB 5.6.6 R(4) or the term after which the equity share becomes payable if less] if the value of your property increased. [Include if relevant: "and what would happen if your property decreased in value."] Please note that you should add this payment to the amount of any early repayment charges that may be payable - see Section 10';

   3. (c)

      except where (g) applies, example cash amounts for the value of the property and the corresponding amount of the equity share payable assuming an average annual increase, in the value of the property secured by the regulated mortgage contract of 1%, 5% and 10% over the term from (i);

   4. (d)

      if the customer would be required to pay the mortgage lender an amount because the value of the property on which the regulated mortgage contract would be secured had decreased from its value at the start of the term of the regulated mortgage contract, include example cash amounts for the value of the property and the corresponding amount payable assuming an average annual decrease, in the value of the property secured by the regulated mortgage contract of 1%, 5% and 10% over the term from (i);

   5. (e)

      if the amount of the equity share payable cannot go above or below a certain level, an explanation that this is the case along with a cash example described as 'the maximum amount you could pay';

   6. (f)

      include this text after the cash examples in (c) (or, if applicable, after the cash examples in (d) or (e)):2'This is not an indication of how the actual value of your property may change.';

   7. (g)

      where (c) or (d) apply and the maximum percentage equity share payable is less than the example percentages in (c) or (d), only cash examples for those percentages required by (c) or (d) which are below this maximum need be quoted, along with the maximum in accordance with (e);

   8. (h)

      if there are no restrictions on the amount of the equity share payable, the following text should follow the text in (f):'The amount you will need to pay could be much higher than this.'; and

   9. (i)

      for the purposes of the examples required by (c) or (d), the term used must be stated and must be the term of the regulated mortgage contract in accordance with MCOB 5.6.6 R(4) or the term after which the equity share becomes payable, if less;

2. (2)

   Section 5 'Overall cost of this mortgage' of the illustration must contain the following text at the end of the section:'The APR and the total amount you must pay do not take account of the share that [insert name of mortgage lender] takes in any increase in the value of your property as described in Section 4. So you should not use these measures to compare this mortgage with other mortgages that do not involve [insert name of mortgage lender] taking a share in any increase in the value of your property.'; and

   1
3. (3)

   Section 10 'What happens if you do not want this mortgage any more?' must contain the following text at the end of the first sub-heading 'Early repayment charges':'Remember to add the cost of paying any share in the value of the property to [insert name of mortgage lender] - see Section 4.'

The requirements at MCOB 5.6.129 R(1) must be immediately followed by the following additional text, prominently displayed (see MCOB 2.2.9 G):'You will need to pay this share in the value of your property either as a lump sum or through extra loan payments. Think carefully about whether you can afford this.'

If the interest rate charged on the regulated mortgage contract is deferred, MCOB 5.6 applies with the following additions:

1. (1)

   A section headed: 'Effect of deferring interest on the amount you owe' must be included in the illustration after Section 6.

2. (2)

   This section must be numbered 6a so that the numbering follows on consecutively from the preceding section unless MCOB 5.6.55 R applies in which case it should be numbered 6b.

3. (3)

   Under the section heading the following text must be included:'This table shows the effect of the deferred interest being added to the amount you owe'; and if the interest rate is variable:'The amounts shown in this table could be considerably different if the interest rate changes.'

4. (4)

   Under the text in (3), a table must be included showing each year or part year that the interest rate charged on the regulated mortgage contract is deferred, in the format set out in MCOB 5 Annex 1 and containing the following information in the columns under the following headings:

   1. (a)

      'Year': This must list the years as 1, 2, 3 and so on for each year or part year that the interest charged on the regulated mortgage contract is deferred. Where the interest rate charged on the regulated mortgage contract changes at a particular date rather than annually, the table may be adapted to accommodate this (for example, by including details of more than one interest rate each year).

   2. (b)

      'Interest deferred': This must show the percentage of interest deferred based on the rates charged on the regulated mortgage contract at the date the illustration is issued.

   3. (c)

      'Amount of deferred interest added to the mortgage': This must show the cumulative amount that is added to the loan as a cash amount as a result of deferring the payment of interest.

   4. (d)

      'Remaining debt before deferred interest is added': This must show the amount of loan outstanding on the regulated mortgage contract before any deferred interest is added.

   5. (e)

      'Remaining debt with deferred interest added': This must show the amounts from (4)(c) and (4)(d) added together.

MCOB 5.6.134 R to MCOB 5.6.138 G apply only to loans without a term or regular payment plan where some or all of the interest rolls up, for example secured bridging loans, secured overdrafts or mortgage credit cards.

The heading for Section 6 of the illustration and the heading of the column on the right-hand side of this section must state the frequency with which payments must be made by the customer. (For example, if payments were to be made on a monthly basis, the heading for this section would be 'What you will need to pay each month' and the column would be headed 'Monthly payments'). Where no regular payments are required on the regulated mortgage contract, for example where all interest is rolled-up on a secured bridging loan, then this section must be retained and the frequency of payments assumed must be 'monthly'.

All the payments in Section 6 of the illustration must be calculated based on the frequency used for the purposes of the headings in MCOB 5.6.40 R and must be shown in the column on the right-hand side of this section. If no payments are required, for example on a secured bridging loan or secured overdraft, then this column should be marked on the illustration as nil.

Section 6 of the illustration must contain the following information:

1. (1)

   the loan amount on which the illustration is based. Where fees are being added to the loan then this figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the fees [and insurance premiums] that are shown in Section 8 [and Section 9] as being added to your mortgage.';

2. (2)

   the assumed start date that has been used in the illustration must be stated using the following text:'This illustration assumes that the mortgage will start on [insert assumed start date].';

3. (3)

   where no payments are required (or no payments are allowed), for example a secured bridging loanor secured overdraft, then section 6 of the illustration should state if no payments are required or no payments can be made; or

4. (4)

   where a minimum payment is required, for example on a mortgage credit card:

   1. (a)

      a statement that a minimum payment will be required;

   2. (b)

      an explanation of the basis on which this has been calculated, for example a percentage of the loan amount;

   3. (c)

      if this monthly payment is insufficient on its own to repay the regulated mortgage contract over the term specified, the following text:'This payment will not be sufficient to repay the mortgage over the term specified'; and

   4. (d)

      the amount that the customer must pay, recorded in the right-hand column of this section.

MCOB 5.6.140 R to MCOB 5.6.145 R apply only to loans without a term or regular payment plan where some or all of the interest rolls up, for example secured bridging loans, secured overdrafts or mortgage credit cards.

Under the section heading 'Are you comfortable with the risks?':

1. (1)

   under the sub-heading 'What if interest rates go up?' the illustration must include the following:

   1. (a)

      if the interest rate is fixed throughout the term of the regulated mortgage contract, an explanation that the interest rate will not vary because the interest rate is fixed;

   2. (b)

      if the interest rate is fixed for part of the term of the regulated mortgage contract, an explanation of when or how increases in the interest rate charged on the regulated mortgage contract affect the amount the customer must pay back;

   3. (c)

      if the interest rate cannot go above or below a certain level, or both, throughout the term of the regulated mortgage contract, an explanation that this is the case;

   4. (d)

      if the interest rate cannot go above or below a certain level for part of the term of the regulated mortgage contract, an explanation that this is the case and of when or how increases in the interest rate charged on the regulated mortgage contract affect the amount the customer must pay back;

   5. (e)

      except where (2)(a) or (2)(b) apply, Section 7 of the illustration must include the following text:'The total amount you must pay back shown in this illustration could be considerably different if interest rates change. For example, for one percentage point increase in [describe the interest rate that applies], the total amount you must pay back will increase by around £[insert amount by which the total amount payable will increase].'.

2. (2)

   paragraph (1)(e) does not apply:

   1. (a)

      where the interest rate is fixed throughout the term of the regulated mortgage contract; or1

   2. (b)

      where the difference between the interest rate included in the illustration in accordance with MCOB 5.6.25 R(2) and the maximum interest rate that can be charged on the regulated mortgage contract is less than one percentage point.

3. (3)

   under the sub-heading 'What if your income goes down?':'You will still have to pay your mortgage if you lose your job or if illness prevents you from working. Think about whether you could do this.'

The amount by which the total amount payable would increase in accordance with MCOB 5.6.140 R(1)(e) must be calculated as follows:

1. (1)

   unless the total amount borrowed is used, it must be assumed that all payments due on the regulated mortgage contract have actually been paid, all additional fees and payments due have been paid, and no under or overpayments have been made;

2. (2)

   unless the total amount borrowed is used, the calculation must be based on the amount of the loan outstanding from the earliest point at which the interest rate charged on the regulated mortgage contract can vary; for example, if the regulated mortgage contract has an initial fixed interest rate, this will be from the point at which the fixed interest rate ends;

3. (3)

   the interest rate from which the increase is calculated must be the variable interest rate charged on the regulated mortgage contract at the date that the illustration is issued (that is, the variable interest rate quoted in Section 4 of the illustration); where the variable interest rate changes after a set period or on a set date, it must be based on the initial variable interest rate charged on the regulated mortgage contract at the date the illustration is issued. (For example, if the initial interest rate is discounted, it must be based on the discounted rate.)

Unless MCOB 5.6.140 R(2)(a) or (b) applies, the following words must be prominently displayed at the end of the sub-section 'What if interest rates go up?':'Rates may increase by much more than this so make sure you can afford this loan.'

The following words must be prominently displayed at the end of the sub-section 'What if your income goes down?':'Make sure you can afford your mortgage if your income falls'.

The following text must be included at the end of Section 7 'Are you comfortable with the risks?': The Money Advice Service8 information sheet "You can afford your mortgage now, but what if...?" will help you consider the risks. You can get a free copy from http://www.moneyadviceservice.org.uk,8 or by calling 0800 138 7777.'7612