MOGI 2.6 Lifetime mortgages: advising and selling standards (MCOB 8)

This section of the Guide explains the advising and selling rules for lifetime mortgages in chapter 8 of MCOB (MCOB 8). These rules apply to mortgage intermediaries selling such mortgages. There are separate requirements depending on whether you give advice or not.

Some rules are the same as those that apply to standard mortgages. They cover the scope of service (including whole of market requirements) and independence.

However, we have treated the lifetime mortgage market as a separate mortgage market. So when we refer to the whole market in MCOB 8, we mean the whole market for lifetime mortgages (MCOB 8.3.2 R).

The rules relating to standard mortgages also apply here, but with two differences. Firstly, the IDD is tailored to reflect the particular features of lifetime mortgages. It also includes a warning to consumers to take advice if they are at all unsure about which lifetime mortgage or home reversion scheme is right for them. Secondly, if you sell home reversion schemes as well as lifetime mortgages, you must disclose this on the IDD (MCOB 8.4.1 R).

You must meet our training and competence requirements if you advise on lifetime mortgages (see Chapter 3 of this Part).

You must take reasonable steps to ensure that you do not recommend that a consumer takes out a lifetime mortgage, or varies an existing lifetime mortgage, unless it is suitable for that consumer (MCOB 8.5.2 R). When you are assessing suitability, there are several factors you need to consider. We have explained these in the form of a diagram at Appendix B.

If you also sell home reversion schemes and, as a result of your suitability assessment you recommend a home reversion scheme to the consumer, this does not constitute regulated advice.

Some staff involved in non-advised sales must meet our training and competence requirements (see Chapter 3 of this Part).

The rules relating to standard mortgages apply here, but with some additions. The scripted questions must cover the following subjects:

1. (1)

   whether the consumer is eligible for the lifetime mortgage;

2. (2)

   the consumer's preferences for his estate;

3. (3)

   the consumer's health and life expectancy;

4. (4)

   the consumer's future plans and needs (for example, whether he is likely to need to raise further funds or move house);

5. (5)

   whether the consumer has a preference or need for stability in the amount of payments (where payments are required);

6. (6)

   whether the consumer has a preference or need for any other features of a lifetime mortgage or a home reversion scheme;

7. (7)

   whether the consumer has considered alternative methods of raising the required funds, and in particular a home reversion scheme or where relevant, a grant; and

8. (8)

   whether the consumer has established whether either his entitlement to means-tested benefits or his tax position or both will be adversely affected.

In non-advised sales you should encourage the consumer to seek advice if he is unsure about making his own choice. For grants, benefits and tax issues, you should, where relevant, encourage the consumer to seek further information from an appropriate source such as his local authority or Citizens Advice Bureau (or other similar agency).