MCOB 9.4 Content of illustrations

An illustration provided to a customer must:

1. (1)

   contain the material set out in MCOB 9 Annex 1 in the order and using the numbered section headings, sub-headings and prescribed text in MCOB 9 Annex 1, except where provided for in MCOB 9.4;

2. (2)

   follow the format of the template in MCOB 9 Annex 1, with:

   1. (a)

      prominent use of the 'key facts' logo followed by the text 'about this lifetime mortgage' (if a firm resizes the logo it must ensure that the proportions remain consistent with the original design, so as not to distort it in any way);

   2. (b)

      each section clearly separated;

   3. (c)

      all the amounts set out in Sections 6, 8, 11, 12 and 15 in columns that make the amounts 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 lifetime 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 5 of the illustration in accordance with MCOB 9.4.24 R(1);

7. (7)

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

8. (8)

   describe any higher lending charge as a "higher lending charge" and not use any other expression to describe such charges; and

9. (9)

   describe any regulated lifetime mortgage contract as a "lifetime mortgage" and not use any other expression to describe such a mortgage or omit that description from the name given to any product that meets the definition.

A firm must include in the illustration all prescribed section headings in MCOB 9 Annex 1, except that:

1. (1)

   in Section 8 (What you owe and when):

   1. (a)

      Section 8 (A) (details of mortgage payments) is only required where the customer is required to make payments to the mortgage lender in respect of the capital or all or part of the interest charged on the regulated lifetime mortgage contract;

   2. (b)

      Section 8(B) (projection of roll-up of interest) is only required where all or part of the interest on the regulated lifetime mortgage contract is rolled-up;

2. (2)

   Section 16 (Using a mortgage intermediary) is required only where the illustration is provided to the customer by, or on behalf of, a mortgage intermediary; and

3. (3)

   where the illustration is issued in connection with a further advance in accordance with MCOB 9.8.5 R, an additional section "Total borrowing" must be inserted after Section 8, and must be numbered "9", with all subsequent sections renumbered accordingly.

The illustration provided to a customer must:

1. (1)

   contain only the material specified in MCOB 9.4 and no other material except where provided for elsewhere in MCOB 9.4; 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:

1. (1)

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

2. (2)

   the amount of the loan required by the customer, or for drawdown mortgages, the amount the customer wishes to draw down on a monthly (or such frequency that amounts are available) basis. Where the amount the customer can draw down is variable, the firm must agree with the customer an expected amount to be drawn down per year (see MCOB 9.4.13 R);

3. (3)

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

4. (4)

   such information relating to the customer, or the property, or both as is necessary to determine that the customer would qualify for the regulated lifetime mortgage contract in question; and

5. (5)

   the estimated term of the regulated lifetime mortgage contract, calculated in accordance with MCOB 9.4.10 R.

1. (1)

   In estimating a term under MCOB 9.4.6 R(5) a firm must:

   1. (a)

      use the following mortality table: PMA92(C=2010) and PFA92(C=2010) for males and females respectively, derivable from the Continuous Mortality Investigation Report 17, published by the Institute of Actuaries and the Faculty of Actuaries in 1999; and2

   2. (b)

      for the purposes of the illustration, where the table does not result in a life expectancy expressed in whole years, the term should be rounded up to the next whole year (for example, if the result is between fifteen and sixteen years, an estimated term of sixteen years should be used in the illustration).

2. (2)

   Where the term estimated using the mortality table set out in (1) is less than fifteen years, the firm should use a term of fifteen years in preparing the illustration.

Where the illustration is issued to two or more customers who intend to borrow jointly, the term estimated in accordance with MCOB 9.4.10 R should be based on the longest life expectancy.

If the customer requests an illustration showing a term of the customer's choice, that illustration must be issued in addition to the illustration showing the term calculated in accordance with MCOB 9.4.10 R. The term chosen should be stated in Section 4 of the illustration "What you have told us" (see MCOB 9.4.21 R(2)).

The amount referred to in MCOB 9.4.6 R(2) is:

1. (1)

   the amount that the customer has asked to borrow or draw down; or

2. (2)

   where the regulated lifetime mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card:6

   1. (a)

      6(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; or

   2. (b)

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

3. (3)

   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 or draw down the amount he requested, an estimate of the amount that the customer could borrow or draw down, based on the information obtained from the customer.

Where the illustration relates to a regulated lifetime 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 9.4 may be adapted to accommodate this. The adaptations made must be limited to those that are necessary.

The following information must be included at the head of the illustration:

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

4. (4)

   the prescribed text at the head of the illustration in MCOB 9 Annex 1.

Under the section heading "About this information", the prescribed text in MCOB 9 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 9 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 lifetime mortgage.[name of firm] is not recommending a particular lifetime mortgage for you. However, based on your answers to some questions, it is giving you information about this lifetime mortgage so that you can make your own choice, or find out about other ways in which you may be able to release equity from your home.".

Under the section heading "What is a lifetime mortgage?", the prescribed text in MCOB 9 Annex 1 under this heading must be included.

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 9.4.6 R and MCOB 9.3.12 R (apart from MCOB 9.4.6 R(1) and MCOB 9.4.6 R(5) which are provided for in Section 5 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)

   Where the customer requests an additional illustration showing a term of their choice, the term chosen by the customer must be stated in this section, together with a statement to the effect that the term is the customer's choice.

3. (3)

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

   1. (a)

      except where (b) applies, this section must include the following text after the loan amount or amount to be drawn down from MCOB 9.4.13 R(1):"plus £ [insert total amount of fees and other charges added to the loan] for fees that have been added to the loan [or amount drawn down] - see Section 11 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 or amount to be drawn down from MCOB 9.4.13 R(1):"plus £ [insert total amount of fees and other charges added to the loan] for fees that have been added to the loan [or amount drawn down]. These and the additional fees that you need to pay are shown in Section 11.".

4. (4)

   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 or amount to be drawn down:12

   1. (a)

      except where (b) applies, this section must include the following text after the loan amount or amount to be drawn down from MCOB 9.4.13 R(1) (which may be combined with the prescribed text in (3) if applicable): "plus £[insert amount of premium or charges, or both, to be added to the loan] for insurance [premiums] [and] [charges] that have been added to the loan [or amount drawn down] " see Section 12 for details."; or2

   2. (b)

      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 or amount to be drawn down from MCOB 9.4.13 R(1) (which may be combined with the prescribed text in (3) if applicable): "plus £ [insert amount of premium or charges, or both, to be added to the loan] for insurance [premiums] [and] [charges] that have been added to the loan [or amount drawn down]. These and any additional insurance [premiums] [and] [charges] that you need to pay are shown in Section 12.".2

5. (5)

   If the amount on which the illustration is based does not involve any charges or payments being added to the amount to be borrowed or amount to be drawn down, but there are charges that must be paid by the customer, Section 4 of the illustration must include the following text after the loan amount from MCOB 9.4.13 R(1):"No fees have been added to this amount but the fees you need to pay are shown in Section 11. For details of any insurance charges, see Section 12.".2

6. (6)

   If the regulated lifetime 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 4 of the illustration must include the following text after the loan amount from MCOB 9.4.13 R(1):2"We do not charge any fees for this lifetime mortgage.".

At the end of Section 4 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 lifetime mortgage contract to which the illustration relates (a trading name used by the mortgage lender may also be stated in accordance with MCOB 9.4.2 R(6)), and the name, if any, used to market the regulated lifetime mortgage contract;

2. (2)

   include a statement describing the regulated lifetime mortgage contract;

3. (3)

   if the regulated lifetime mortgage contract is linked to an investment, and payments required on the regulated lifetime mortgage contract will be deducted from the income from the investment, include a statement that this is the case;

4. (4)
   1. (a)

      provide a description of the interest rate type and rate of interest that applies in accordance with the format described in MCOB 9.4.26 R and MCOB 9.4.27 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 life 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 9.4.26 R and MCOB 9.4.27 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);

5. (5)

   include a statement regarding the term of the regulated lifetime mortgage contract using the following text:"We have based this illustration on an estimated term of [insert number of years] years, but remember that the term of this lifetime mortgage is not fixed and could be longer or shorter than [insert number of years] years. If you are still living in your home at the end of [insert number of years] years, the lifetime mortgage will continue to run.";

6. (6)

   include a statement of the maximum amount the customer may borrow from the mortgage lender and the circumstances (if any) in which the customer may be able to borrow additional funds at a future date;

7. (7)

   if the customer is obliged to buy any tied products under the regulated lifetime mortgage contract include the following information:

   1. (a)

      details of the tied products required;

   2. (b)

      the following text:"You are obliged to take out [insert details of the tied product(s)] through [insert name of mortgage lender or if relevant, name of mortgage intermediary] as a condition of this lifetime mortgage. Please refer to Section 12 of this illustration for further details.";

8. (8)

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

9. (9)

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

10. (10)

    where the intention of the regulated lifetime 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 lifetime mortgage contract) include the warning about the loss of statutory rights from MCOB 9.4.102 R(2)(a) or (b) in Section 5 of the illustration rather than Section 14.

MCOB 9.4.27 R sets out some examples of descriptions of interest rate types and rates of interest that must be used in the illustration to comply with MCOB 9.4.24 R(4). If an interest rate is not described in MCOB 9.4.27 R, it must be presented in the illustration in a way that is consistent with the descriptions in MCOB 9.4.27 R.

Where the loan under the regulated lifetime 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 lifetime 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 9.4.24 R(4)(c).

Further information about the regulated lifetime mortgage contract may be included in Section 5 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 "Benefits", the illustration must include:

1. (1)

   a description of the monetary amount(s), and in a box aligned to the right of the document, the monetary amount(s) that the customer will receive as a lump sum and/or as a monthly [or such other frequency as is applicable] payment;

2. (2)

   where the regulated lifetime mortgage contract is linked to an investment and the payments required on the regulated lifetime mortgage contract will be deducted from the income from the investment, the monetary amount of the net income the customer will receive. This must be shown in a box immediately underneath that required in (1) and containing the subheading "Your net income"; and

3. (3)

   if applicable, statements of any other benefits, incentives and guarantees that apply to theregulated lifetime mortgage contract. This must be shown under the subheading "Other benefits and incentives'.

The illustration must include under the heading "Risks - important things you must consider" statements and warnings on the following:

1. (1)

   a brief statement of the specific circumstances in which the mortgage lender is able to repossess the property;

2. (2)

   a statement of how the mortgage lender will treat any negative equity arising during the life of the regulated lifetime mortgage contract and at the time the amount borrowed under the regulated lifetime mortgage contract is due to be repaid in full;

3. (3)

   a statement of the effect of the customer wanting or needing to move home (either into another property or into sheltered accommodation or long term care or residential care), covering the circumstances in which the regulated lifetime mortgage contract is portable, and whether early repayment charges are payable (the illustration is not required to include under this heading the exact amount of any early repayment charges);

4. (4)

   a statement of the effect on the regulated lifetime mortgage contract of another party moving into the property (for example on marriage or the formation of a civil partnership 4or where a family member acts as a carer);

5. (5)

   a brief statement of the mortgage lender's requirements for repair and maintenance of the property, including the mortgage lender's right (if any) to enter the property to effect essential repairs, and the circumstances in which this may occur;

6. (6)

   a warning that taking out this regulated lifetime mortgage contract may affect the customer's tax and welfare benefits position, that tax and welfare benefits can change and that the customer should consider seeking further information from HM Revenue and Customs3, Benefits Agency or another source of advice such as a Citizens' Advice Bureau;

   3
7. (7)

   a brief statement as to whether the customer can secure borrowing from any other source on the property in the future (and if applicable a warning that an increasing debt may mean that it may not be possible to borrow more in the future); and

8. (8)

   a statement included prominently at the end of Section 7: "Risks " important things you must consider" using the following specified text:"Check that this mortgage will meet your needs if you want your family or others to inherit your home. If you are in doubt, seek independent legal and financial advice".

Under the heading "Risks - important things you must consider" the illustration must also include the following if they apply:

1. (1)

   for drawdown mortgages where there is a monthly (or such other frequency as may apply) cash sum payable, a statement that inflation can erode the value of the cash sum over time;

2. (2)

   where:

   1. (a)

      the regulated lifetime mortgage contract is linked to an investment; and

   2. (b)

      the payments required on the regulated lifetime mortgage contract will be deducted from the income from the investment; and

   3. (c)

      the customer will receive a fixed net income;

   a statement that inflation can erode the value of the cash sum over time;

3. (3)

   for drawdown mortgages, details of any circumstances where the mortgage lender may alter or discontinue payments to the customer without their prior consent; and

4. (4)

   for allregulated lifetime mortgage contracts, a statement or warning with regard to any material issue not covered elsewhere in MCOB 9.4.33 R and MCOB 9.4.35 R.

The heading of the column on the right-hand side of Section 8 of the illustration 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 owe and when" and the column must be headed "Monthly payments".1

All the payments in Section 8 of the illustration must be calculated based on the frequency used for the purposes of the heading in MCOB 9.4.37 R and must be shown in the column on the right-hand side of this section.

Section 8 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 9.4.21 R(3) and MCOB 9.4.21 R(4), and the following text must follow the loan amount:"which include[s] the [fees] [and] [insurance premiums] that are shown in [Section 11] [and] [Section 12] as being added to your lifetime mortgage.";

2. (2)

   2the 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 9.4.47 R applies, for each of the interest rates charged on the regulated lifetime 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 lifetime 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 9.4.38 R); and

4. (4)

   where the payment due to the mortgage lender is to be deducted from the income provided by a linked investment product (such as an annuity) such that the customer receives the net income, a clear statement to this effect.

The following information must be included in the description of the interest rate required by MCOB 9.4.39 R(3)(c) except where MCOB 9.4.47 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" should be used to indicate this.

The information required by MCOB 9.4.39 R(3)(d) must exclude the cost of any products which may be sold in conjunction with the regulated lifetime mortgage contract (whether tied products or not) unless the cost has been added to the regulated lifetime mortgage contract.

If, because of the assumed start date of the regulated lifetime mortgage contract, the initial payment differs from the subsequent payments, the initial payment must be shown in this section in accordance with MCOB 9.4.39 R(3)(d).

Where the loan under the regulated lifetime 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 9.4.39 R(3) and MCOB 9.4.43 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 "initial interest rate payable" for each part must be displayed;

5. (5)

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

6. (6)

   the regular payment for each part must be stated and the total payment for all parts highlighted (excluding the information listed in MCOB 9.4.45 R).

Unless all of the interest rates described in MCOB 9.4.47 R(4) apply for the life of the loan part to which they apply, then an additional sub section titled "What you will owe in future" must be included to indicate the future stepped payments. 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 that interest rates will not change.

An explanation of the table required in accordance with MCOB 9.4.51 R must be shown in a box immediately under the heading using the following text:"This shows how the amount(s) paid to you and the interest and any fees that we charge mount up over [insert number of years estimated in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R] years. It has been calculated using the current interest rate(s) of [insert interest rate(s)]. Interest is added to the amount you owe [insert frequency of roll-up of interest - e.g. monthly]. Remember that the mortgage could run for a longer or shorter time than [insert number of years estimated in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R] years, and if it runs for longer, the amount you owe will carry on increasing.".

The table showing the projection in the section headed "Projection of roll-up of interest" should show annual details in columns under the following headings:

1. (1)

   "Year": this should list the years as 1,2,3... etc. The start date for year one must be an assumed date of completion of theregulated lifetime mortgage contract. The table must show each year of the term estimated in accordance with MCOB 9.4.10 R (or if required, MCOB 9.4.12 R).

2. (2)

   "Balance at start of year": this must show the estimated amount outstanding on the regulated lifetime mortgage contract at the beginning of each year. For year one this balance would include any lump sum advanced on completion.

3. (3)

   (where the regulated lifetime mortgage contract is a drawdown mortgage) "Amount paid to you during the year": this must include all amounts to be drawn down during the year in question. Where the amount the customer can draw down is variable, the mortgage lender must agree with the customer an expected amount to be drawn down per year.

4. (4)

   "Interest charged at [insert percentage(s)]": this must be the interest charge for the year in question, calculated on the balance at the start of the year plus the amount drawn down (if applicable) and any fees added to the loan during the year. The percentage(s) used must be as follows:12

   1. (a)

      for a fixed interest rate that applies throughout the term, the fixed interest rate available at the date the illustration is issued;

   2. (b)

      for a variable interest rate, the interest rate that is available at the time the illustration is issued; and

   3. (c)

      for a capped interest rate, the actual interest rate that is available at the time the illustration is issued, where this is lower than the interest rate at which the cap is set.

   Where more than one interest rate applies (e.g. fixed for part of the term, followed by variable), the mortgage lender must use the rates that are available at the time the illustration is issued.

5. (5)

   "Fees charged during the year": this must include all fees that can be added to the loan during the life of theregulated lifetime mortgage contract. In year one this will include any fees due to the mortgage lender unless the customer has confirmed that he wishes to pay them separately. The fees for the final year shown must include any fees required on repayment in full of the regulated lifetime mortgage contract.

6. (6)

   "What you owe at the end of the year": this is the total of:

   1. (a)

      the balance at start of the year;

   2. (b)

      total drawn down (if applicable);

   3. (c)

      interest charged for the year; and

   4. (d)

      fees for the year.

   The balance at the end of the final year of the term (estimated in accordance with MCOB 9.4.10 R (or if required, MCOB 9.4.12 R)) must therefore be the estimated amount required to repay in full the regulated lifetime mortgage contract at the end of that year.

Where the customer is required to make payments to the mortgage lender on theregulated lifetime mortgage contract, the illustration must include the following under the section heading "Will the interest rate change?":

1. (1)

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

2. (2)

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

3. (3)

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

4. (4)

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

5. (5)

   if (3) or (4) apply the maximum or minimum interest rate, or both, and the payments at each of these interest rates; and

6. (6)

   if the regulated lifetime 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 lifetime mortgage contract affect the customer's payments for each part (or combination of parts).

1. (1)

   Except where (3) applies, where the customer is required to make payments to the mortgage lender on theregulated lifetime mortgage contract, and the customer's payments can vary with changes in interest rates at any time during the life of theregulated lifetime mortgage contract, Section 9: "Will the interest rate change?" must also contain the following text:"The [frequency of payments from MCOB 9.4.37 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 [frequency of payments] payment will increase by around £ [insert amount by which payment will increase].".

2. (2)

   If MCOB 9.4.53 R(6) applies the following additional text must be included after the text in (1), for each part (or combination of parts), where the amounts by which the customer's payments would increase are different:"After the [describe the type of 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].".

3. (3)

   Paragraph (1) does not apply where the difference between the interest rate included in the illustration in accordance with MCOB 9.4.39 R and the maximum interest rate that can be charged on the regulated lifetime mortgage contract is less than one percentage point.

The amount by which the customer's payments would increase in accordance with MCOB 9.4.54 R(1) must be calculated as follows:

1. (1)

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

2. (2)

   the interest rate from which the increase is calculated must be the variable interest rate charged on the regulated lifetime mortgage contract at the date that the illustration is issued (that is, the variable interest rate quoted in Section 5 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 lifetime 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).

Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, the following information must be included under the section heading "Will the interest rate change?":

1. (1)

   if the interest rate is fixed throughout the life of theregulated lifetime mortgage contract, an explanation that the estimated debt shown in accordance with MCOB 9.4.51 R(6) will not vary because the interest rate is fixed;

2. (2)

   if the interest rate is fixed for part of the life of theregulated lifetime mortgage contract, an explanation of when or how increases in the interest rate charged on the regulated lifetime mortgage contract affect the estimated debt shown in accordance with MCOB 9.4.51 R(6);

3. (3)

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

4. (4)

   if the interest rate cannot go above a certain level for part of the life of theregulated lifetime mortgage contract, an explanation of when or how increases in the interest rate charged on the regulated lifetime mortgage contract affect the estimated debt shown in accordance with MCOB 9.4.51 R(6).

Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, Section 9: "Will the interest rate change?" must also contain (if applicable):

1. (1)

   if the interest rate is variable, the following text:"If the interest rate increases, the amount you owe will also increase. If the interest rate was [one percentage point higher than shown MCOB 9.4.51 R(4)(b)] throughout the example term of [insert number of years " see MCOB 9.4.10 R or MCOB 9.4.12 R] years, the amount you would owe us at the end of that time would be: [insert amount]."; or

2. (2)

   if the interest rate will become variable at the end of a fixed or capped rate period, the following text:"If the interest rate increases after the [insert as applicable: fixed rate period or capped rate period] ends, the amount you owe will also increase. If the interest rate was [one percentage point higher than shown in MCOB 9.4.51 R(4)(b) above] throughout the remainder of the example term of [insert number of years - see MCOB 9.4.10 R or MCOB 9.4.12 R] years, the amount you would owe us at the end of that time would be: [insert amount]."; or

3. (3)

   if a capped rate applies throughout the life of the regulated lifetime mortgage contract and the interest rate at the date of issue of the illustration is lower than the capped rate, the following text:"If the interest rate increases, the amount you owe will also increase. The interest rate on this lifetime mortgage cannot be higher than [rate at which interest is capped] If the interest rate was [rate at which interest is capped] throughout the example term of [insert number of years - see MCOB 9.4.10 R and MCOB 9.4.12 R] years, the amount you would owe us at the end of that time would be: [insert amount].".

Where MCOB 9.4.54 R(1) applies, the following words must also be prominently displayed at the end of the sub-section "Will the interest rate change?""Rates may increase by much more than this so make sure you can afford the [insert frequency of payments from MCOB 9.4.37 R] payment.".

Where MCOB 9.4.58 R(1) or (2) applies, the following words must also be prominently displayed at the end of the sub-section "Will the interest rate change?""Your debt may increase significantly."

Where the customer is required to make payments to the mortgage lender on the regulated lifetime mortgage contract in respect of the interest payable, and therefore the amount outstanding on the regulated lifetime mortgage contract will broadly remain unchanged, Section 10: "How the value of your home could change" must contain the following text:"The amount you owe will usually stay the same over the life of the mortgage so the amount due to [name of mortgage lender] when the mortgage is repaid will be [amount of loan], unless charges have to be added.".

Where the customer is not required to make payments to the mortgage lender on the regulated lifetime mortgage contract and therefore all or part of the interest is rolled up, Section 10: "How the value of your home could change" must contain the following text:"When you look at how the amount you owe goes up, remember also that property prices can go up or down, and this can affect the amount of money left over for you or your estate after the mortgage is repaid to [name of mortgage lender].".

Section 10: "How the value of your home could change" must contain the following text in addition to the text in accordance with MCOB 9.4.62 R or MCOB 9.4.63 R:"Based on the estimated value of your home now of [insert amount from MCOB 9.4.6 R(3)] this example shows what the value of your home would be after [insert term from MCOB 9.4.10 R or MCOB 9.4.12 R] years if the value went up by 1% each year or went down by 1% each year. Remember also that the mortgage may run for more or less than [insert term from MCOB 9.4.10 R, or MCOB 9.4.12 R] years. This is an example only and gives no guide to how much the value of your home will actually change. If your home went up in value by 1% each year it would be worth [insert amount] after [insert term from MCOB 9.4.10 R, or MCOB 9.4.12 R] years. If your home went down in value by 1% each year - it would be worth [insert amount] after [insert term from MCOB 9.4.10 R or MCOB 9.4.12 R] years."

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 12 in accordance with MCOB 9.4.72 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 9.4.65 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 that no fees apply;

   2. (b)

      if there are no fees to be itemised in accordance with (2), the sub-heading must be retained and only the text in MCOB 9.4.65 R(2) applies.

The following information must be provided for each fee included in this section of the illustration in accordance with MCOB 9.4.65 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;

6. (6)

   which fees (if any) are estimated in accordance with MCOB 9.4.114 R(2) and based on representative information; and

7. (7)

   if any fee is payable after the start of the regulated lifetime mortgage contract and subject to change in the future, for example a fee payable on final repayment of the regulated lifetime 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 9.4.68 R:"A higher lending charge is payable because you are borrowing [insert the ratio of the mortgage amount (from MCOB 9.4.13 R) to the property's price or value (from MCOB 9.4.6 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 lifetime mortgage. This will increase the amount you owe to [insert amount of the lifetime mortgage with the fee(s) included] and will increase the amount you owe shown in Section 8. If you want to do this, you should ask for another illustration that shows the effect of this on the amount you owe"

4. (4)

   Any fees that are estimated based on representative information in accordance with MCOB 9.4.114 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 the 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 lifetime mortgage contract which is not a tied product

2. (2)

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

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 lifetime 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 lifetime 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 name of 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 name of mortgage lender or where relevant the name of the mortgage intermediary, or both]":

1. (1)

   if the regulated lifetime 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 such insurance 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 mortgage 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 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 9.4.72 R and MCOB 9.4.76 R) that the firm issuing the illustration wishes to sell to the customer.

If no quotations are included in the illustration in accordance with MCOB 9.4.79 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 9.4.73 R(3), MCOB 9.4.76 R(1) or MCOB 9.4.79 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 9.4.21 R(4), 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 lifetime mortgage contract:

1. (1)

   under the sub-heading "Early repayment charges":

   1. (a)

      an explanation of whether early repayment charges are payable;

   2. (b)

      an explanation of when early repayment charges are payable;

   3. (c)

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

   4. (d)

      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 lifetime mortgage contract is repaid early;

   5. (e)

      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 9.4.88 R, which must be described in the illustration as "cash examples";

   6. (f)

      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 described in the illustration as "the maximum charge you could pay" [add if applicable, "plus (a) fee(s) which (is/are) currently £x"]; and

   7. (g)

      details of whether or not the regulated lifetime 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 lifetime 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);

2. (2)

   under the sub-heading "Circumstances in which early repayment charges do not apply", a clear statement of the circumstances in which no early repayment charges will be payable by the customer. (This may include moving to another property, or into sheltered accommodation or residential care.) Where the regulated lifetime mortgage contract is portable on moving house but no early repayment charges are payable by the customer, the remaining information required by MCOB 9.4.83 R(1)(g) should be included here.

Where MCOB 9.4.83 R(1)(e) 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 three examples are in addition to the maximum early repayment charge required by MCOB 9.4.83 R(1)(f). 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 9.4.83 R(1)(c); and

2. (2)

   the maximum early repayment charge required by MCOB 9.4.83 R(1)(f).

1. (1)

   In calculating example cash amounts in accordance with MCOB 9.4.83 R(1)(e), it must be assumed that:

   1. (a)

      the regulated lifetime mortgage contract is repaid in full;

   2. (b)

      all payments due (if applicable) on the regulated lifetime 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 (if applicable) 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 theregulated lifetime mortgage contract, or on interest rates generally, the interest rate(s) 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 9.4.88 R included in the illustration would vary either if the interest rate charged on the regulated lifetime 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.

Where the early repayment charge could be higher than those stated in the illustration if the regulated lifetime mortgage contract continued after the end of the term estimated in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R, Section 13 of the illustration must include a clear statement to that effect.

Under the section heading "Additional features" the illustration must include, where relevant, details of how the mortgage lender would treat any payments by the customer in excess of those required, and details of any additional features or facilities under the various sub-headings in MCOB 9.4.93 R.

1. (1)

   If none of the features at MCOB 9.4.93 R are applicable to the regulated lifetime 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 lifetime 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 9.4.91 R to MCOB 9.4.110 R, the firm may include a reference to that supplementary information in Section 14.1

The relevant sub-headings are as follows:

1. (1)

   "Overpayments"

2. (2)

   "Underpayments"

3. (3)

   "Payment holidays"

4. (4)

   "Borrow back"

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".

1. (1)

   Under the sub-heading 'Overpayments', the illustration must include details of any restrictions on lump sum and regular overpayments (if payments are required) on theregulated lifetime mortgage contract, together with a statement as to whether or not the amount on which the interest 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), this statement must be accompanied by an explanation of when the amount on which the interest 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 13 of the illustration, but may refer to Section 13.

Under the sub-heading "Underpayments", the illustration must include details of whether 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 "Additional borrowing available without further approval", the illustration must provide details of circumstances in which additional secured lending is offered with the regulated lifetime 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 "Additional secured borrowing", the illustration must provide details of circumstances in which additional secured lending is offered with the regulated lifetime 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 lifetime 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 whether a credit card is offered with theregulated lifetime 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 lifetime 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 those providedunder the Consumer Credit Act 1974, 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 lifetime mortgage offer will tell you more about this."

Where any of the additional features under MCOB 9.4.99 R to MCOB 9.4.102 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 5 and Section 8 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 9.4.10 R or MCOB 9.4.12 R;

3. (3)

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

4. (4)

   the payments on this total debt based on the frequency of payments in MCOB 9.4.37 R (if payments are required) 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 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 other factors such as ratio of the loan amount to the property value.

Where more than one additional borrowing facility from MCOB 9.4.99 R to MCOB 9.4.102 R applies, the total debt and total payments due (if payments are required) 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 9.4.91 R and these are credit facilities that do not meet the definition of a regulated mortgage contract, the relevant parts of Section 14 of the illustration must include the following text:

   "This additional feature is not regulated by the FSA."1

2. (2)

   Where additional features are included in accordance with MCOB 9.4.91 R and these are credit facilities regulated by the Consumer Credit Act 1974, the relevant parts of Section 14 of the illustration must include the following text after the text in (1):"but is regulated under the Consumer Credit Act 1974. 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."

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.

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

1. (1)

   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 5 of the illustration in accordance with MCOB 9.4.24 R(7));

2. (2)

   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 lifetime mortgage contract (for example, if a different interest rate applies if the account is overdrawn); and

3. (3)

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

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

1. (1)

   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 5 of the illustration in accordance with MCOB 9.4.24 R(7));

2. (2)

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

3. (3)

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

Under the section heading "Overall cost of this mortgage":

1. (1)

   the following text must be included in the illustration:"The APR helps you to compare lifetime mortgages by giving you one rate that shows the overall cost of the mortgage. It takes into account some fees and charges as well as the interest due, and this means that the APR may be higher than the interest rate shown in Sections 5 and 8. Only use the APR to compare lifetime mortgages of the same type, and where the same example term is used."

2. (2)

   where the customer is required to make payments on the regulated lifetime mortgage contract the following text must also be included in the illustration:"The overall cost takes into account the payments in Sections 8 and 11 above."; and

3. (3)

   reference must be made to any other payments that have been included in the APR but not included in Sections 8 and 11 of the illustration if these are relevant to the regulated lifetime mortgage contract that is the subject of the illustration.

The following text must be included after the text required by MCOB 9.4.111 R with the relevant cost measures shown in the right-hand column of Section 15 in accordance with the layout shown in MCOB 9 Annex 1:

1. (1)

   "The total amount you would pay back over the example term of [insert number of years in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R] including the amount borrowed is £ [insert total amount payable]", and

2. (2)

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

1. (1)

   The APR and the total amount payable in MCOB 9.4.113 R must be calculated on the basis of information obtained from the customer in accordance with MCOB 9.4.6 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 lifetime mortgage contract to which the illustration relates.

3. (3)

   Where the regulated lifetime mortgage contract is a roll-up of interest mortgage, the total amount payable must be based on the total amount that the customer would owe at the end of the example term.

At the end of Section 15 the following text must be included, if relevant:"The figures in this section will vary following interest rate changes."

Where the illustration is issued to a customer by, or on behalf of, a mortgage intermediary, Section 16 "Using a mortgage intermediary" must be included in the illustration and must include the following:

1. (1)

   unless MCOB 9.4.120 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 9.4.119 R(1) or MCOB 9.4.120 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 9.4.119 R(1) or MCOB 9.4.120 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:

1. (1)

   follow Section 15 "Overall cost of this mortgage", unless the illustration is issued by a mortgage intermediary, in which case it must follow Section 16 "Using a mortgage intermediary"; and

2. (2)

   include the name, address and contact point of the firm providing the illustration.

If the customer's liability under a regulated lifetime mortgage contract is in a currency other than sterling, MCOB 9.4 applies to the illustration for that regulated lifetime mortgage contract with the following modifications:

1. (1)

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

2. (2)

   the following information must be stated under Section 5 "Description of this mortgage"

   1. (a)

      the amount in sterling on which the illustration is based from MCOB 9.4.13 R 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 5 "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 9.4.13 R would increase in sterling]. [Insert if payments are required: This would increase your [insert frequency of payments from MCOB 9.4.37 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)

      if payments are required, the amount by which (2)(b) would increase the customer's payments based on the frequency of payments from MCOB 9.4.37 R, shown as a sterling equivalent cash amount.

The text at MCOB 9.4.33 R(8) must be immediately followed by the following additional text, prominently displayed (for guidance on prominence see MCOB 2.2.9 G): "Changes in the exchange rate may increase the sterling equivalent of your debt."

If the regulated lifetime mortgage contract is a shared appreciation mortgage, MCOB 9.4 applies to the illustration with the following modifications:

1. (1)

   Section 5 "Description of this mortgage" must contain the following additional information and text in this order after the details required by MCOB 9.4.24 R to MCOB 9.4.29 R:

   1. (a)

      "This lifetime 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 lifetime 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 lifetime 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 home of [insert details from MCOB 9.4.6 R(3)], the example(s) below show(s) what the value of your home would be and what share of that value [name of mortgage lender] would take after [insert example term of the loan in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R or the term after which the equity share becomes payable if less] if the value of your home increased. [Include if relevant: "and what would happen if your home 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 13"

   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 lifetime mortgage contract of 1%, 5% and 10% over the example term from (i) below;

   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 lifetime mortgage contract would be secured had decreased from its value at the start of the term of theregulated lifetime 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 lifetime mortgage contract of 1%, 5% and 10% over the term from (i) below;

   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 home 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 example term used must be stated and must be the estimated term of the regulated lifetime mortgage contract in accordance with MCOB 9.4.10 R or MCOB 9.4.12 R or the term after which the equity share becomes payable, if less;

2. (2)

   Section 10: "How the value of your home could change" of the illustration must contain the following text at the end of the section:"You also need to think about the cost of paying any share in the value of your home to [insert name of mortgage lender] - see Section 5."

3. (3)

   Section 13 " 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 your home to [insert name of mortgage lender] " see Section 5."

4. (4)

   Section 15 "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 home as described in Section 3. So you should not use these measures to compare this lifetime mortgage with other lifetime mortgages that do not involve [insert name of mortgage lender] taking a share in any increase in the value of your home."

The requirements at MCOB 9.4.130 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 home to [name of mortgage lender] [insert time at which share must be paid - for example 'when your lifetime mortgage is repaid']. Think carefully about how this will affect the amount left over for you or your estate."