Related provisions for MCOB 6.4.12
1 - 17 of 17 items.
An illustration provided to a customer must:(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) follow the format of the template in MCOB 9 Annex 1, with:(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
(1) Firms can obtain from the FSA website http://www.fsa.gov.uk a specimen of the "key facts" logo. When reproducing the logo firms may use colour providing this does not diminish the prominence of the logo.(2) MCOB 9.4.2 R(3) does not prevent the use of different fonts and typefaces for headings and risk warnings. Its purpose is to prevent particular sections of the illustration from being made less prominent than other sections through the inconsistent use of font sizes and
A firm must include in the illustration all prescribed section headings in MCOB 9 Annex 1, except that:(1) in Section 8 (What you owe and when):(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;(b) Section 8(B) (projection of roll-up of interest) is only required where all or part of
MCOB 9.4.6 R sets out minimum requirements. The illustration may be personalised to a greater degree if the mortgage lender or mortgage intermediary wishes, subject to the restrictions on the information that can be obtained from the customer in MCOB 9.3.12 R when the illustration is provided in accordance with MCOB 5.5.1 R(2)(c).
(1) In estimating a term under MCOB 9.4.6 R(5) a firm must:(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(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
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) the amount that the customer has asked to borrow or draw down; or(2) where the regulated lifetime mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card, the total borrowing that the firm is willing to provide under the regulated lifetime mortgage contract; or(3) in cases where, on the basis of the information obtained from the customer before providing the illustration, it is clear
MCOB 9.4.13 R(3) does not require information to be obtained from the customer before providing an illustration in order to ascertain the amount the customer is eligible to borrow. Instead, its purpose is to avoid a firm being in a position where it would otherwise have to provide a customer with an illustration for an amount it knew the customer would not be eligible for, based on whatever information it had obtained from the customer before providing the illustration.
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) the customer's name;(2) the date of issue of the illustration;(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) the prescribed
(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) 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
(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) Where the customer requests an additional illustration showing
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) 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) include a statement describing the regulated lifetime mortgage contract;(3) if the regulated
Examples of types of statement that would satisfy MCOB 9.4.24 R(2) are as follows (more than one may apply to particular types of regulated lifetime mortgage contract):(1) For a roll-up of interest mortgage:"You do not have to make any repayments during the life of this lifetime mortgage. The loan, all of the interest and charges due to [name of mortgage lender] will be repaid from the sale of your home. This will happen on your death [or the death of the last borrower] or if
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) 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) each part must be numbered for ease
Under the section heading "Benefits", the illustration must include:(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) 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
The illustration must include under the heading "Risks - important things you must consider" statements and warnings on the following:(1) a brief statement of the specific circumstances in which the mortgage lender is able to repossess the property;(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
Under the heading "Risks - important things you must consider" the illustration must also include the following if they apply:(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) where:(a) the regulated lifetime mortgage contract is linked to an investment; and(b) the payments required on the regulated lifetime mortgage contract will be deducted
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
Section 8 of the illustration must contain the following information:(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)
MCOB 9.4.39 R(3) applies to each interest rate charged on the regulated lifetime mortgage contract covered by the illustration. This means that it applies to different interest rates charged at different times, for example, where the interest rate changes at the end of any initial discounted, fixed or other special interest rate period.
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) where the interest rate can change, the word "currently" must be used to illustrate the current interest rate payable; and(2) where the interest rate changes after a given period the words "followed by" should be used to indicate this.
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) each part must be numbered for ease of reference in the illustration;(2) the loan amounts must
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) "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) "Balance at start of year": this must
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) 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) if the interest rate is fixed for part of the life of theregulated lifetime mortgage
(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
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) 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) the interest rate from which the increase is calculated must be the variable interest rate charged
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
Under the section heading "What fees must you pay?" the illustration must:(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) 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.".
An example of a fee that would be included in Section 11 would be an administrative charge to redeem theregulated lifetime mortgage contract. An example of a fee that would not be included would be a fee payable by the customer to insure their property elsewhere (however this would need to be stated in the separate "Insurance" section as required by MCOB 9.4.72 R). Where fees are payable only on early repayment of theregulated lifetime mortgage contract. they should not be stated
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) 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) the remaining fees must be itemised under the sub-heading: "Other fees"; and(3) (a) if there are no fees to be itemised in accordance with (1), the sub-heading must be retained and a statement must
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) a description of the fee;(2) the amount payable by the customer recorded in a column headed "Fee amount" on the right-hand side of this section;(3) for fees included under the sub-heading "Other fees", to whom the fee is payable;(4) when the fee is payable;(5) whether or not the fee is refundable, and if so, the extent to which it is refundable;(6)
(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) If the customer has asked for any fees to be added to the loan, this must be stated alongside each fee.2(3)
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) 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
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]", the illustration should not include any insurance policy that may be taken out by a mortgage lender itself to protect its own interests rather than the customer's interests, for example, because of the ratio of the loan amount to the property value.1
If the cost of any insurance that the mortgage lender might take out to protect its own interests because of the ratio of the loan to the property value is passed on to the customer, it will be shown elsewhere in the illustration, for example as a higher lending charge or in the interest rate charged.
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.
(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:(a) must include a brief description only of the type of insurance (full details of the insurance cover may however be provided separately); and(b) (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";
The purpose of the illustration is to provide the customer with details of the cost of borrowing the amount required over the example term from MCOB 9.4.6 R and MCOB 9.4.10 R (or MCOB 9.4.12 R). Section 14 has been designed specifically to allow examples of the effect of any additional features of the regulated lifetime mortgage contract such as a linked current account. Examples of these features should therefore be shown in Section 14 and not in Section 15 or Section 8 of the
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) 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) the name of the mortgage lender who will make the payment, the name of the mortgage intermediary
(1) Where the further advance for which the customer has applied is in the form of an annual insurance premium secured by a first legal charge, a firm:(a) may, instead of providing an illustration in accordance with MCOB 7.6.7 R, provide confirmation of the matters required by MCOB 7.6.5 R; and(b) where (a) applies use the following text:"Your annual insurance premium has been/will be added to your mortgage account [unless you pay it by dd/mm/yy]. If you choose to pay it in full
(1) Under the sub-heading 'Linked current account', the illustration must include the following information:(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));(b) an explanation of the interest rates that apply under different circumstances to the linked current account, if different from the interest rate charged
A mortgage intermediary must take reasonable steps to ensure that an illustration which it issues, or which is issued on its behalf, other than that provided by a mortgage lender:(1) is accurate within the following tolerances:(a) no more than one percent or £1, whichever is the greater, below the actual figures charged by the mortgage lender for the following:(i) the total amount payable in Section 15 of the illustration;(ii) the amounts that the customer must pay by regular
An offer document may not always exactly match the illustration provided before application even when the loan requirements have not changed. For example, where a fixed rate has a defined end date, the total amount payable may be different because the number of payments at the fixed rate has reduced, or the estimated amount of interest to be charged has changed, assuming a later date at which the regulated lifetime mortgage contract will start.
The illustration provided as part of the offer document in accordance with MCOB 6.4.1 R (1) must meet the requirements of MCOB 5.6 (Content of illustrations) with the following modifications:(1) the illustration must be suitably adapted and revised to reflect the fact that the firm is making an offer to a customer and updated to reflect changes to, for example, the interest rate, charges, the exchange rate or the APR required by MCOB 10 (Annual Percentage Rate), at the date the
The illustration provided in accordance with MCOB 7.6.7 R must;(1) be based on the amount of the further advance only;(2) use the term 'additional borrowing' in place of the term 'lifetime mortgage' where appropriate throughout the titles and text of the illustration;(3) include an additional section headed: 'Total borrowing' and numbered '9' after Section 8, (with subsequent sections of the illustration renumbered accordingly) including the following text:(a) "This section gives
MCOB 9.4.18 R is replaced with the following: "Section 1: 'About this information' Under the section heading 'About this information', the following text must be included:"We are required by the Financial Services Authority (FSA) - the independent watchdog that regulates financial services - to provide you with this illustration. All firms selling lifetime mortgages are required to give illustrations, like this one, that contain similar information presented in the same way."
If a customer requests, or agrees to, a change to a regulated lifetime mortgage contract (other than a change as described in MCOB 7.6.7 R to MCOB 7.6.27 R (as modified by MCOB 9)) that changes the amount of each payment due (where payments are required), a firm must provide the customer with the following information, in a single communication, before the change takes effect:(1) the amount outstanding on the regulated lifetime mortgage contract at the date the change is requested;(2)
Table of modified cross-references to other rules:
This table belongs to MCOB 9.5.1 R.
Subject |
Rule or guidance |
Reference in rule or guidance |
To be read as a reference to: |
Application: What? |
MCOB 6.1.5R |
MCOB 6 |
|
Content of offer document |
MCOB 6.1.6G |
MCOB 5.6 |
MCOB 9.4 |
Purpose |
MCOB 6.2.1G |
MCOB 6 |
|
General |
MCOB 6.3.2R |
||
Records |
MCOB 6.4.3R |
||
Modifications to the illustration |
MCOB 6.4.5G |
MCOB 6.4.4R(5)(b) |
MCOB 9.5.4R(6)(b) |
Modifications to the illustration |
MCOB 6.4.6R |
MCOB 6.4.4(1) |
MCOB 9.5.4R(1) |
Modifications to the illustration |
MCOB 6.4.6R(1) and (2) |
MCOB 5.6 |
MCOB 9.4 |
Modifications to the illustration |
MCOB 6.4.7R |
MCOB 6.4.4R(1) |
MCOB 9.5.4R(1) |
Modifications to the illustration |
MCOB 6.4.7R(2) |
MCOB 5 |
MCOB 9 |
Modifications to the illustration |
MCOB 6.4.7R(3) |
||
Modifications to the illustration |
MCOB 6.4.7R(3) |
||
Other information contained in the offer document |
MCOB 6.4.13R |
MCOB 5.6.122R |
MCOB 9.4.126R |
Offer documents in place of illustrations |
MCOB 6.6.1R |
Table of rules in MCOB 6 replaced by rules in MCOB 9:
This table belongs to MCOB 9.5.1 R
Subject |
Rule |
Rule replaced by |
Modifications to the illustration |
MCOB 6.4.4R |
MCOB 9.5.4R |
The illustration provided as part of the offer document in accordance with MCOB 6.4.1 R(1) must meet the requirements of MCOB 9.4, with the following modifications:(1) the illustration must be suitably adapted and revised to reflect the fact that the firm is making an offer to a customer and updated to reflect changes to, for example, the interest rate, charges, the exchange rate or the APR required by MCOB 10 (Annual Percentage Rate) at the date the illustration is issued;(2)
(1) In relation to a regulated lifetime mortgage contract, where the APR is calculated for the purpose of a qualifying credit promotion it must be assumed that the credit is being provided for a period of 15 years beginning with the relevant date.(2) In relation to a regulated lifetime mortgage contract, where the APR is calculated for the purpose of an illustration, the period for which the credit is to be provided must be calculated in accordance with MCOB 9.4.10 R or MCOB 9.4.12
Before: (1) entering into a regulated mortgage contract with a customer; or(2) making a further advance on an existing regulated mortgage contract; or (3) changing all or part of a regulated mortgage contract from one interest rate to another;1a firm must disclose to the customer:(a) in the illustration provided in accordance with MCOB 5, MCOB 7.6.7 R, MCOB 7.6.18 R, MCOB 7.6.22 R, MCOB 7.6.31 R, or MCOB 9; and(b) in the illustration provided as part of the offer document in accordance
There are other pre-contract information requirements outside this chapter, including:(1) for financial promotions, inCOB 3 (Financial promotion)(2) for designated investment business, inCOB 4.2 (Terms of business and client agreements with customers), COB 4.3 (Disclosing information about services, fees and commission - packaged products), COB 5.5 (Information about the firm), COB 6.1 to COB 6.5 (Product disclosure) and CASS (Client assets);(3) for non-investment insurance contracts3,
(1) This chapter amplifies Principle 6 and Principle 7, which require a firm to pay due regard to the information needs of its customers and to treat them fairly. (2) Where a firm provides services to a customer in relation to a further advance, rate switch, or addition or removal of a party to a regulated mortgage contract, this chapter also requires that the customer is provided with an illustration to make clear the price and features associated with that variation.1(3) This
(1) Where, in relation to a regulated mortgage contract for a business purpose, a customer either:(a) seeks an immediate increase in the borrowing provided under the regulated mortgage contract; or(b) overdraws on the borrowing under the regulated mortgage contract;the further advance rules in MCOB 7.6.7 R to MCOB 7.6.17 R do not apply.(2) Where (1) applies, the firm must within five business days provide the customer with either:(a) a business illustration for the new total borrowing;
Table of modified cross-references to other rules:
This table belongs to MCOB 9.6.1R.
Subject |
Rule or guidance |
Reference in rule or guidance |
To be read as a reference to: |
Application |
MCOB 7.1.4R |
MCOB 7.6.7R - MCOB 7.6.33G as modified by MCOB 9.8.5R - 9.8.9R |
|
Application |
MCOB 7.1.5R |
||
Information in more than one document |
MCOB 7.3.3R |
MCOB 7 |
|
Frequency of statements |
MCOB 7.5.6G |
MCOB 7.5.3R(2) |
MCOB 9.8.1R(2) |
Annual statement - additional content |
MCOB 7.5.9G |
MCOB 7.5.3R(2)(b) |
MCOB 9.8.1R |
Further advances |
MCOB 7.6.7R |
MCOB 5 |
MCOB 9.4 |
Further advances |
MCOB 7.6.10G |
MCOB 7.6.9R(10 |
MCOB 9.8.5R(1) |
Further advances |
MCOB 7.6.10G |
MCOB 5.6.34 |
MCOB 9.4.114R |
Further advances |
MCOB 7.6.11G |
MCOB 7.6.9R(3) and (4) |
MCOB 9.8.5R(3) |
Further advances |
MCOB 7.6.11G(2) |
MCOB 5.6.40R |
MCOB 9.4.37R |
Further advances |
MCOB 7.6.12G |
MCOB 7.6.9R(3) |
MCOB 9.8.5R(3) |
Further advances |
MCOB 7.6.13R |
MCOB 5.6.25R(2)(a) |
MCOB 9.4.24R(4)(a) |
Further advances |
MCOB 7.6.13R |
MCOB 7.6.9R(3)(b) |
MCOB 9.8.5R(3)(b) |
Further advances |
MCOB 7.6.14R |
MCOB 5 |
MCOB 9 |
Rate switches |
MCOB 7.6.20R |
MCOB 5 |
MCOB 9 |
Rate switches |
MCOB 7.6.20R |
MCOB 5 |
MCOB 9 |
Addition or removal of party to contract |
MCOB 7.6.22R |
MCOB 5 |
MCOB 9 |
Addition or removal of party to contract |
MCOB 7.6.25R |
MCOB 5 |
MCOB 9 |
Changes to payments |
MCOB 7.6.29R |
MCOB 7.6.28R |
|
Changes to payments |
MCOB 7.6.30R |
MCOB 7.6.28R |
MCOB 9.8.9R or MCOB 9.8.10R |
Use of illustrations |
MCOB 7.6.31R |
MCOB 7.6.28R |
|
Use of illustrations |
MCOB 7.6.31R |
MCOB 5 |
MCOB 9 |
Use of illustrations |
MCOB 7.6.32R |
MCOB 7.6.28R |
|
Use of illustrations |
MCOB 7.6.32R |
||
Simultaneous requests |
MCOB 7.6.33G |
||
Simultaneous requests |
MCOB 7.6.33G |
MCOB 5 |
MCOB 9 |