Related provisions for MCOB 7.6.6

MCOB 5.6.2R06/11/2006

An illustration provided to a customer must:(1) contain the material set out in MCOB 5 Annex 1 in the order and using the numbered section headings, sub-headings and prescribed text in MCOB 5 Annex 1, except where provided for in MCOB 5.6;(2) follow the layout of the template in MCOB 5 Annex 1 with:(a) prominent use of the Key facts3 logo followed by the text 'about this mortgage';33(b) each section clearly separated;(c) all the amounts to be paid in Sections 5, 6, 8 and 9 in

MCOB 5.6.6R31/10/2004

As a minimum the illustration must be personalised to reflect the following requirements of the customer:(1) the specific regulated mortgage contract in which the customer is interested;(2) the amount of the loan required;(3) the price or value of the property on which the regulated mortgage contract would be secured (estimated where necessary);(4) the term of the regulated mortgage contract (where the customer is unable to suggest a date at which he expects to repay the loan,

MCOB 5.6.9R31/10/2006

The amount referred to in MCOB 5.6.6 R(2) is:(1) in cases where on the basis of the information obtained from the customer before providing the illustration it is clear that the customer would not be eligible to borrow the amount he requested, an estimate of the amount that the customer could borrow based on the information obtained from the customer; or(2) where the regulated mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card:4(a)

MCOB 5.6.14G31/10/2004

(1) MCOB 5.6.13 R applies where, for example, the illustration covers a regulated mortgage contract that is:(a) divided so that a certain amount of the loan is payable on a fixed interest rate, and a certain amount on a discounted interest rate; or(b) a combination of a repayment mortgage and an interest-only mortgage and the loan is subdivided into different types of interest rate and/or different rates of interest.(2) MCOB 5.6.13 R does not apply where an illustration covers

MCOB 5.6.17R31/10/2004

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

MCOB 5.6.25R06/07/2010

Under the section heading 'Description of this mortgage' the illustration must:(1) state the name of the mortgage lender providing the regulated mortgage contract to which the illustration relates (a trading name used by the mortgage lender may also be stated in accordance with MCOB 5.6.2 R(6)), and the name, if any, used to market the regulated mortgage contract;(2) (a) provide a description of the interest rate type and rate of interest that applies in accordance with the format

MCOB 5.6.31R31/10/2004

Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has an agreed term for repayment and a regular payment plan (that is, it is not a revolving credit agreement such as a secured overdraft or mortgage credit card, or a regulated mortgage contract where all of the interest rolls up, such as an open-ended bridging loan):(1) the following text must be included in the illustration: 'The overall cost takes into account the payments in Sections

MCOB 5.6.32R31/10/2004

Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has no agreed term for repayment, (and a 12 month term has been assumed), or no regular payment plan, or both (for example, a revolving credit agreement such as a secured overdraft or mortgage credit card or a regulated mortgage contract where all the interest rolls up such as an open-ended bridging loan):(1) the following text must be included in the illustration: 'The overall cost

MCOB 5.6.35R31/10/2004

(1) The APR and the total amount payable in MCOB 5.6.34 R must be calculated on the basis of information obtained from the customer under MCOB 5.6.6 R.(2) 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

MCOB 5.6.39R31/10/2004

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

MCOB 5.6.42R31/10/2004

Section 6 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 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the [fees] [and] [insurance premiums] that are shown in [Section 8] [and] [Section 9] as being added to your mortgage.'(2) the assumed

MCOB 5.6.44G31/10/2004

If appropriate, the two statements required by MCOB 5.6.42 R(1) and MCOB 5.6.42 R(2) may be merged, for example 'These payments are based on a loan amount of £x and assume that the mortgage will start on [dd/mm/yy]'.

MCOB 5.6.53G31/10/2004

An example of how the information required by MCOB 5.6.52 R (1), MCOB 5.6.52 R (3) and MCOB 5.6.52 R (5) may be presented is as follows:

Cost of repaying the capitalYou will still owe £Z at the end of the mortgage term. You will need to make separate arrangements to repay this. When comparing the payments on this mortgage with a repayment mortgage, remember to add any money that you may need to pay into a separate savings plan to build up a lump sum to repay this amount.
Savings plan that you do not have to take out through [insert name of mortgage lender or mortgage intermediary]	Monthly payments
XYZ savings plan (see separate product disclosure document)	£C
What you will need to pay each month including the cost of a savings plan to repay the capital
36 payments at a fixed rate currently x% followed by:	£(A+C)
264 payments at a variable rate currently y%.	£(B+C)

MCOB 5.6.58R31/10/2004

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

MCOB 5.6.63R31/10/2004

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

MCOB 5.6.65R06/04/2011

The following text must be included at the end of Section 7 'Are you comfortable with the risks?': The Money Advice Service8 information sheet "You can afford your mortgage now, but what if...?" will help you consider the risks. You can get a free copy from http://www.moneyadviceservice.org.uk,8612or by calling 0800 138 7777.’7866

MCOB 5.6.70R31/10/2004

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

MCOB 5.6.77R31/10/2004

The following information must be included under the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert the name of the mortgage lender, or where relevant the name of the mortgage intermediary, or both]':(1) if the regulated mortgage contract requires the customer to take out an insurance policy (other than that which is a tied product which the customer is obliged to purchase through the mortgage lender,

MCOB 5.6.78G31/10/2004

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

MCOB 5.6.84R31/10/2004

Under the heading 'What happens if you do not want this mortgage any more?', the illustration must include the following information on the regulated mortgage contract:(1) under the sub-heading 'Early repayment charges':(a) an explanation that the customer cannot repay the regulated mortgage contract early, if this is the case;(b) an explanation of whether early repayment charges are payable;(c) an explanation of when early repayment charges are payable;(d) an explanation of any

MCOB 5.6.118G31/10/2004

MCOB 2.3.7 R requires any material inducements provided by a mortgage lender, whether directly or indirectly, to a mortgage intermediary or third party (unless the payment only reflects the cost of outsourcing work relating to the processing of mortgage applications by a firm unconnected to the mortgage intermediary) to be quantified in cash terms, which will enable the cash values to be included in the illustration in accordance with MCOB 5.6.117 R.1

MCOB 5.6.119G31/10/2004

An example of a statement which would comply with MCOB 5.6.113 R and MCOB 5.6.117 R would be:'[name of mortgage lender] will pay [name of mortgage intermediary] an amount of £350 in cash and benefits if you take out this mortgage.'

MCOB 5.6.121R31/10/2004

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

MCOB 5.6.122R31/10/2004

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

MCOB 5.6.123G31/10/2004

An example of wording which would comply with MCOB 5.6.122 R would be:'If you wish to discuss this mortgage illustration please contact [name of firm] at [address] or on [telephone number]'.

MCOB 5.6.124R31/10/2006

4(1) 4The following words must be prominently displayed in the illustration, after the contact details: 'Your home may be repossessed if you do not keep up repayments on your mortgage'.(2) If the loan may be secured on property which is not the customer's home the statement in (1) may be amended but only to the extent necessary in order to reflect that fact.4

MCOB 5.6.133R31/10/2004

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

MCOB 5.6.136R31/10/2004

Section 6 of the illustration must contain the following information:(1) the loan amount on which the illustration is based. Where fees are being added to the loan then this figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the fees [and insurance premiums] that are shown in Section 8 [and Section 9] as being

MCOB 5.6.137G31/10/2004

An example of the statement required by MCOB 5.6.136 R(3) would be:'You [do not need to/cannot] make regular payments on this mortgage.'

MCOB 5.6.138G31/10/2004

An example of MCOB 5.6.136 R(4) would be:'You need to make minimum payments as follows:3% of the amount outstanding £x.xxThis payment will not be sufficient to repay the mortgage over the term specified.'

MCOB 5.6.139R31/10/2004

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

MCOB 5.6.143R31/10/2004

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

MCOB 5.6.145R06/04/2011

The following text must be included at the end of Section 7 'Are you comfortable with the risks?': The Money Advice Service8 information sheet "You can afford your mortgage now, but what if...?" will help you consider the risks. You can get a free copy from http://www.moneyadviceservice.org.uk,8 or by calling 0800 138 7777.'76128686

DISP App 1.2.1G06/04/2008

If there has been a failure to give compliant and proper advice, or some other breach of the duty of care, the basic objective of redress is to put the complainant, so far as is possible, in the position he would have been in if the inappropriate advice had not been given, or the other breach had not occurred. In many cases, although it must be a matter for inquiry and assessment in each individual case, this position is likely to have resulted in the complainant taking a repayment

DISP App 1.2.2G06/04/2008

Unless the contrary is demonstrated, it should be assumed that the complainant could have afforded the mortgage on a repayment basis.1212

DISP App 1.2.3G06/04/2008

The measure of any financial loss suffered by the complainant will be arrived at by:12(1) comparing the complainant's current capital position with the position he would have been in had the loan been a standard repayment mortgage as at the date the firm decides to regard the complaint as justified; and(2) comparing the cost of the complainant's actual monthly outgoings and those he would have made had his loan been on a standard repayment basis as at the date the firm decides

DISP App 1.2.4G06/04/2008

12In some cases other factors may be included in the overall calculation, for example, if mortgage arrangement fees were waived by agreement on the occasion of the endowment policy being taken out.

DISP App 1.2.5G06/04/2008

12If, on comparing the complainant's current endowment position with the repayment alternative, the surrender value of the endowment policy exceeds the amount of the capital which the complainant would have repaid through the repayment method, then, at the point of the assessment, the complainant has suffered no capital loss (but the complainant may suffer some compensatable consequential loss associated with changing the mortgage arrangements to the repayment basis, see DISP

DISP App 1.2.6G06/04/2008

12If the complainant's endowment mortgage outgoings exceed the equivalent cost for the repayment method, the complainant should be compensated for the higher payments in addition to any loss on the surrender value and capital repaid comparison. This means, for example, that if the endowment arrangement has been more expensive, this may result in compensatable loss even though the capital repayment against surrender comparison may be favourable to the endowment.

DISP App 1.2.8G06/04/2008

12It is unlikely to be reasonable to bring "savings" into account in circumstances where, at the time of the sale of the policy:(1) the complainant was advised or informed orally or in writing that he would have lower outgoings than would be the case under a repayment mortgage, whether or not the difference was quantified; and(2) the complainant has dissipated those "savings" on the strength of this advice or information.

DISP App 1.2.10G06/04/2008

12Where it is otherwise reasonable for "savings" to be brought into account, determining whether or not a complainant is of sufficient means and, if so, to what extent the "savings" are to be brought into account, will have to be based on the facts of each individual case. It will be appropriate to require the complainant to provide adequate information to assist the firm in this task. Matters to be taken into account in this assessment may include:(1) the length of the remaining

DISP App 1.2.16G06/04/2008

12If a complainant becomes aware that he has taken out the endowment policy on the basis of unsuitable advice and inadequate information, he should if necessary, after taking appropriate advice, take reasonable steps to limit his loss, and may in any subsequent claim be unable to recover for losses which are avoidable. The complainant may have to show that he has not delayed unreasonably since becoming aware of his loss. The reasonable costs and expenses the complainant may have

DISP App 1.2.17G06/04/2008

12The standard approach to redress can be illustrated by the following examples, which show how redress would be calculated in certain hypothetical but typical scenarios. (Because the examples are illustrative, round numbers have been used for 'established facts' in each example. The payments should be taken as being made monthly: firms should not approximate by assuming that payments are made annually. If the complainant has benefited from MIRAS, the calculations should allow

DISP App 1.2.18G06/04/2008

1 2Table of examples of typical redress calculations

Example 1	Capital shortfall and higher endowment outgoings
Example 2	Capital shortfall partially offset by lower endowment mortgage outgoings
Example 3	Capital shortfall more than offset by lower endowment mortgage outgoings
Example 4	Capital surplus more than offset by higher endowment mortgage outgoings
Example 5	Capital surplus partially offset by higher endowment mortgage outgoings
Example 6	Capital surplus and lower endowment mortgage outgoings
Example 7	Low start endowment mortgage

DISP App 1.2.19G06/04/2008

1 2Example 1

Example 1
Capital shortfall and higher endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 5 years
Endowment premium per month: £75
Established facts
Endowment surrender value:	£3,200
Capital repaid under equivalent repayment mortgage:	£4,200
Surrender value less capital repaid:	(£1,000)
Cost of converting from endowment mortgage to repayment mortgage:	(£200)
Total outgoings to date
Equivalent repayment mortgage (capital + interest + DTA life cover):	£21,950
Endowment mortgage (endowment premium + interest):	£22,250
Difference in outgoings (repayment - endowment):	(£300)
Basis of compensation
In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid and also because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. The two losses and the conversion cost are therefore added together in order to calculate the redress.
Redress
Loss from surrender value less capital repaid:	(£1,000)
Loss from total extra outgoings under endowment mortgage:	(£300)
Cost of converting to repayment mortgage:	(£200)
Total loss:	(£1,500)
Therefore total redress is:	£1,500

DISP App 1.2.20G06/04/2008

1 2Example 2

Example 2
Capital shortfall partially offset by lower endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 5 years
Endowment premium per month: £60
Established facts
Endowment surrender value:	£2,500
Capital repaid under equivalent repayment mortgage	£4,200
Surrender value less capital repaid under equivalent repayment mortgage:	(£1,700)
Cost of converting from endowment mortgage to repayment mortgage	(£300)
Total outgoings to date:
Repayment mortgage (capital + interest + DTA life cover):	£21,950
Endowment mortgage (endowment premium + interest):	£21,350
Difference in outgoings (repayment - endowment):	£600
Basis of Compensation
In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained form the lower outgoings of the endowment mortgage to date. In calculating the redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain.
Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings
Loss from surrender value less capital repaid:	(£1,700)
Gain from total lower outgoings under endowment mortgage:	£600
Cost of converting to repayment mortgage:	(£300)
Net loss:	(£1,400)
Therefore total redress is:	£1,400
Redress if it is unreasonable to take account of gain from lower outgoings
Loss from surrender value less capital repaid:	(£1,700)
Gain from total lower outgoings under endowment mortgage:	Ignored*
Cost of converting to repayment mortgage:	(£300)
Net loss taken into account:	(£2,000)
Therefore total redress is:	£2,000
* In this example, and also in Examples 3, 7, 8 and 9, the complainant's circumstances are assumed to be such as to make it unreasonable to take account of any of the gain from lower outgoings.

DISP App 1.2.21G06/04/2008

1 2Example 3

Example 3
Capital shortfall more than offset by lower endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 8 years
Endowment premium per month: £65
Established facts
Endowment surrender value:	£7,300
Capital repaid under equivalent repayment mortgage:	£7,600
Surrender value less capital repaid:	(£300)
Cost of converting from endowment mortgage to repayment mortgage:	(£200)
Total outgoings to date:
Repayment mortgage (capital + interest + DTA life cover):	£34,510
Endowment mortgage (endowment premium + interest):	£33,990
Difference in outgoings (repayment - endowment):	£520
Basis of Compensation
In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained from the lower total outgoings of the endowment mortgage. In calculating redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain.
Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings
Loss from surrender value less capital repaid:	(£300)
Gain from total lower outgoings under endowment mortgage:	£520
Cost of converting to repayment mortgage:	(£200)
Net gain:	£20
Therefore, there has been no loss and no redress is payable.
Redress if it is unreasonable to take account of gain from lower outgoings
Loss from surrender value less capital repaid:	(£300)
Gain from total lower outgoings under endowment mortgage:	Ignored
Cost of converting to repayment mortgage:	(£200)
Net loss taken into account:	(£500)
Therefore total redress is:	£500

DISP App 1.2.22G06/04/2008

1 2Example 4

Example 4
Capital surplus more than offset by higher endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 8 years
Endowment premium per month: £75
Established facts
Endowment surrender value:	£7,800
Capital repaid under equivalent repayment mortgage:	£7,600
Surrender value less capital repaid:	£200
Cost of converting from endowment mortgage to repayment mortgage:	(£250)
Total outgoings to date:
Repayment mortgage (capital + interest + DTA life cover):	£34,510
Endowment mortgage (endowment premium + interest):	£34,950
Difference in outgoings (repayment - endowment):	(£440)
Basis of Compensation
In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage but has gained because the surrender value of the endowment is greater than the capital repaid. Since the sum of the loss and the conversion cost is greater than the gain, the redress is calculated as the difference between the two.
Redress
Gain from surrender value less capital repaid:	£200
Loss from total extra outgoings under endowment mortgage:	(£440)
Cost of converting to repayment mortgage:	(£250)
Net loss:	(£490)
Therefore total redress is:	£490

DISP App 1.2.23G06/04/2008

1 2Example 5

Example 5
Capital surplus partially offset by higher endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 10 years
Endowment premium per month: £75
Established facts
Endowment surrender value:	£11,800
Capital repaid under equivalent repayment mortgage	£9,700
Surrender value less capital repaid:	£2,100
Cost of converting from endowment mortgage to repayment mortgage:	(£300)
Total outgoings to date:
Repayment mortgage (capital + interest + DTA life cover):	£46,800
Endowment mortgage (endowment premium + interest):	£47,500
Difference in outgoings (repayment - endowment):	(£700)
Basis of Compensation
In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. However the sum of this and the conversion cost is less than the complainant's gain from the difference between the surrender value of the endowment and the capital repaid. Thus no redress is payable.
Redress
Gain from surrender value less capital repaid:	£2,100
Loss from total extra outgoings under endowment mortgage:	(£700)
Cost of converting to repayment mortgage:	(£300)
Net gain:	£1,100
Therefore, there has been no loss and no redress is payable.

DISP App 1.2.24G06/04/2008

1 2Example 6

Example 6
Capital surplus and lower endowment mortgage outgoings
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 10 years
Endowment premium per month: £65
Established facts
Endowment surrender value:	£10,100
Capital repaid under equivalent repayment mortgage	£9,700
Surrender value less capital repaid:	£400
Cost of converting from endowment mortgage to repayment mortgage:	(£200)
Total outgoings to date:
Repayment mortgage (capital + interest + DTA life cover):	£46,800
Endowment mortgage (endowment premium + interest):	£46,300
Difference in outgoings (repayment - endowment):	£500
Basis of Compensation
In this example, the complainant has gained both because the surrender value of the endowment is greater than the capital repaid and because of the lower total outgoings of the endowment mortgage. These gains are larger than the cost of converting to a repayment mortgage. Thus no further action is necessary.
Redress
As there has been no loss, no redress is payable.

DISP App 1.2.25G06/04/2008

1 2Example 7

Example 7
Low start endowment mortgage
Background
Capital sum of £50,000
25 year endowment policy
Duration to date: 10 years
Endowment premium per month: starting at £35 in first year, increasing by 20% simple on each policy anniversary, reaching £70 after five years and then remaining at that level.
Established facts:
Endowment surrender value:	£8,200
Capital repaid under equivalent repayment mortgage:	£9,700
Surrender value less capital repaid:	(£1,500)
Cost of converting from endowment mortgage to repayment mortgage:	(£250)
Total outgoings to date
Repayment mortgage (capital + interest + DTA life cover):	£46,800
Endowment mortgage (endowment premium + interest):	£45,640
Difference in outgoings (repayment minus endowment):	£1,160
Of this difference in outgoings, £800 arose in the five year period when the complainant was paying a low endowment premium.
Basis of compensation
In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained from the lower total outgoings of the endowment mortgage. As in Example 3, in calculating redress the whole of the gain should be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to do so. However, unlike Example 3, in a low start endowment mortgage the complainant may have chosen to pay a lower than usual premium in the early years (this would need to be established on the facts of the case). Where it has been established that the complainant chose to make lower payments, even if it is unreasonable to take account of the whole of the gain from total outgoings, the gain from paying a lower premium during the low start period is normally taken into account. In such cases the redress is calculated as the capital loss plus the conversion cost minus the total amount by which repayment mortgage outgoings would have exceeded the actual low start endowment mortgage outgoings during the five year low start period.
Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings
Loss from surrender value less capital repaid:	(£1,500)
Gain from total lower outgoings under endowment mortgage:	£1,160
Cost of converting to repayment mortgage:	(£250)
Net loss:	(£590)
Therefore total redress is:	£590
Redress if it is unreasonable to take account of gain from lower outgoings
Loss from surrender value less capital repaid:	(£1,500)
Gain from total lower outgoings during low start period of endowment mortgage:	£800
Cost of converting to repayment mortgage:	(£250)
Net loss taken into account:	(£950)
Therefore total redress is:	£950

DISP App 1.2.26G06/04/2008

12In fixing a repayment comparator, it would be appropriate to have regard to the repayment quotation actually provided at the time of sale. If more than one repayment quotation was obtained, the comparison should be with the quotation which approximates most closely to the terms of the endowment mortgage actually taken. If a repayment quotation was not provided, or is not now available, it should be assumed that the interest rate for the repayment comparison is the same as that

DISP App 1.2.27G06/04/2008

12Unless after due inquiry there is clear evidence that the complainant with a mortgage endowment had no foreseeable need for life cover at the time the endowment arrangements were concluded, in the overall comparison between a repayment mortgage and an endowment mortgage the monthly outgoings under the repayment will include the premium for the decreasing term assurance that would have been required. This adjustment for the cost of life cover is only to be made if the firm is

BIPRU 3.4.56R01/01/2007

Without prejudice to BIPRU 3.4.85 R, an exposure or any part of an exposure fully and completely secured, to the satisfaction of the firm, by mortgages on residential property which is or shall be occupied or let by the owner or the beneficial owner in the case of personal investment companies must be assigned a risk weight of 35%.[Note: BCD Annex VI Part 1 point 45]

BIPRU 3.4.56AR06/03/2008

(1) 4A firm must not treat a lifetime mortgage as an exposure fully and completely secured on residential property for the purposes of BIPRU 3.4.56 R unless the amount of the exposure is calculated according to the following formula:exposure amount =where:(a) P is the current outstanding balance on the lifetime mortgage;(b) i is the interest rate charged on the lifetime mortgage, which for the purposes of this calculation must not be lower than the discount rate referred to in

BIPRU 3.4.58R01/01/2007

Without prejudice to BIPRU 3.4.85 R, an exposure or any part of an exposure to a tenant under a property leasing transaction concerning residential property under which the firm is the lessor and the tenant has an option to purchase, must be assigned a risk weight of 35% provided that the firm is satisfied that the exposure of the firm is fully and completely secured by its ownership of the property.[Note: BCD Annex VI Part 1 point 47]

BIPRU 3.4.59G01/01/2007

An Ijara mortgage is an example of an exposure described in BIPRU 3.4.58 R.

BIPRU 3.4.61R01/01/2007

BIPRU 3.4.60 R (3) does not apply to exposures fully and completely secured by mortgages on residential property which is situated within the United Kingdom.[Note: BCD Annex VI Part 1 point 49]

BIPRU 3.4.64R06/07/2007

The requirements about legal certainty referred to in BIPRU 3.4.60 R (4)(a) are as follows:(1) the mortgage or charge 3must be enforceable in all relevant jurisdictions which are relevant at the time of conclusion of the credit agreement, and the mortgage or charge 3must be properly filed on a timely basis;33(2) the arrangements must reflect a perfected lien (i.e. all legal requirements for establishing the pledge shall have been fulfilled); and(3) the protection agreement and

BIPRU 3.4.65G01/01/2007

The term protection agreement in BIPRU 3.4.64 R (3) refers to the contract or deed by which the mortgage or charge is established.

BIPRU 3.4.67G01/01/2007

A property will need to be revalued over time to ensure that the original purchase price does not overstate the degree of security provided by the property. Ijara providers should undertake revaluations in the same way as providers of conventional mortgages.

BIPRU 3.4.72R01/01/2007

The requirements about documentation referred to in BIPRU 3.4.60 R (4)(c) are that the types of residential real estate accepted by the firm and its lending policies in this regard must be clearly documented.[Note: BCD Annex VIII Part 2 point 8(c)]

BIPRU 3.4.77R01/01/2007

The property must be valued by an independent valuer at or less than the market value. In those EEA States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value.[Note: BCD Annex VIII Part 3 point 62]

BIPRU 3.4.79R01/01/2007

Mortgage lending value means the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements must not be taken into account in the assessment of the mortgage lending value. The mortgage lending value must be documented in a transparent and clear

BIPRU 3.4.80R06/04/2007

The value of the collateral must be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under 2BIPRU 3.4.60 R (4)(b)2 and BIPRU 3.4.66 R and to take account of any prior claims on the property.[Note: BCD Annex VIII Part 3 point 65]

BIPRU 3.4.82G01/01/2007

(1) The application of BIPRU 3.4.81 R may be illustrated by an example. If a firm has a mortgage exposure of £100,000 secured on residential property in the United Kingdom that satisfies the criteria listed in BIPRU 3.4.56 R to BIPRU 3.4.80 R and the value of that property is £100,000, then £80,000 of that exposure may be treated as fully and completely secured and risk weighted at 35%. The remaining £20,000 may be risk weighted at 75% provided the exposure meets the criteria

BIPRU 3.4.91R01/01/2007

If a CRD implementation measure in another EEA State implements the discretion in point 51 of Part 1 of Annex VI of the Banking Consolidation Directive, a firm may apply the same treatment as that CRD implementation measure to exposures falling within the scope of that CRD implementation measure which are fully and completely secured by mortgages on offices or other commercial premises situated in that EEA State.[Note: BCD Annex VI Part 1 points 51 and 57]

BIPRU 3.4.94R01/01/2007

(1) If a CRD implementation measure in another EEA State implements the discretion in point 58 of Part 1 of Annex VI of the Banking Consolidation Directive to dispense with the condition in point 54(b) for exposures fully and completely secured by mortgages on commercial property situated in that EEA State, a firm may apply the same treatment as that CRD implementation measure to exposures fully and completely secured by mortgages on commercial property situated in that EEA State

BIPRU 3.4.99R01/01/2007

Exposures indicated in BIPRU 3.4.56 R to BIPRU 3.4.63 R (Exposures secured by mortgages on residential property) must be assigned a risk weight of 100% net of value adjustments if they are past due for more than 90 days. If value adjustments are no less than 20% of the exposure gross of value adjustments, the risk weight to be assigned to the remainder of the exposure is 50%.[Note: BCD Annex VI Part 1 point 64]

BIPRU 3.4.101R01/01/2007

Exposures indicated in BIPRU 3.4.89 R to BIPRU 3.4.94 R (Exposures secured by mortgages on commercial real estate) must be assigned a risk weight of 100% if they are past due for more than 90 days.[Note: BCD Annex VI Part 1 point 65]

PERG 4.6.2G01/04/2013

In the FCA's view, the circumstances in which a person is giving advice on the borrower varying the terms of a regulated mortgage contract so as to vary his obligations under the contract include (but are not limited to) where the advice is about:(1) the borrower obtaining a further advance secured on the same land as the original loan; or(2) a rate switch or a product switch (that is, where the borrower does not change lender but changes the terms for repayment from, say, a variable

PERG 4.6.6G01/07/2005

Advice would not relate to a particular contract if it consisted of a recommendation that a person should take out a mortgage with ABC building society without (expressly or by implication) specifying what kind of mortgage.

PERG 4.6.7G01/07/2005

Typical recommendations and whether they will be regulated as advice under article 53A of the Regulated Activities Order

This table belongs to PERG 4.6.5 G and PERG 4.6.6 G.

Recommendation	Regulated or not?
I recommend you take out the ABC Building Society 2 year fixed rate mortgage at 5%.	Yes. This is advice which steers the borrower in the direction of a particular mortgage which the borrower could enter into.
I recommend you do not take out the ABC Building Society 2 year fixed rate mortgage at 5%.	Yes. This is advice which steers the borrower away from a particular mortgage which the borrower could have entered into.
I recommend that you take out either the ABC Building Society 2 year fixed rate mortgage at 5% or the XYZ Bank standard variable rate mortgage.	Yes. This is advice which steers the borrower in the direction of more than one particular mortgage which the borrower could enter into.
I recommend you take out (or do not take out) an ABC Building Society fixed rate mortgage.	This will depend on the circumstances. If, for example, the society only offers one such mortgage, this would be a recommendation intended implicitly to steer the borrower in the direction of that particular mortgage which the borrower could enter into and therefore would be advice.
I suggest you take out (or do not take out) a mortgage with ABC Building Society.	No. This is not advice which steers the borrower in the direction of a particular mortgage which the borrower could enter into. However, if the society only offers one mortgage, this would be a recommendation intended implicitly to steer the borrower in the direction of that particular mortgage which the borrower could enter into and therefore would be advice.
I suggest you change (or do not change) your current mortgage from a variable rate to a fixed rate.	No in respect of the advice about rate type, as this does not steer the borrower in the direction of a particular mortgage which the borrower could enter into. Yes in respect of the advice about varying the terms of the particular mortgage that the borrower had already entered into.
I suggest you take out (or do not take out) a variable rate mortgage.	No. This is not advice which steers the borrower in the direction of a particular mortgage which the borrower could enter into.
I recommend you take out (or do not take out) a mortgage.	No. This is not advice which steers the borrower in the direction of a particular mortgage which the borrower could enter into.
I would always recommend buying a house and taking out a mortgage as opposed to renting a property.	No. This is an example of generic advice which does not steer the borrower in the direction of a particular mortgage that he could enter into.
I recommend you do not borrow more than you can comfortably afford.	No. This is an example of generic advice.
If you are looking for flexibility with your mortgage I would recommend you explore the possibilities of either a flexible mortgage or an off-set mortgage. There are a growing number of lenders offering both.	No. This is an example of generic advice.

PERG 4.6.13G01/04/2013

In the FCA's view, advice requires an element of opinion on the part of the adviser which steers or is intended to steer a borrower or potential borrower in the direction of one or more particular mortgages. In effect, it is a recommendation as to a course of action. Information on the other hand, involves objective statements of facts and figures.

PERG 4.6.15G01/07/2005

Information relating to entering into regulated mortgage contracts may often involve one or more of the following:(1) an explanation of the terms and conditions of a regulated mortgage contract, whether given orally or in writing or by providing leaflets and brochures;(2) a comparison of the features and benefits of one regulated mortgage contract with another;(3) the production of scripted questions for the borrower to use in order to exclude options that would fail to meet his

PERG 4.6.16G01/04/2013

In the FCA's opinion, however, such information is likely take on the nature of advice if the circumstances in which it is provided give it the force of a recommendation as described in PERG 4.6.10 G. Examples of situations where information provided by a person ('P') are likely to take the form of advice are given below.(1) P provides information on a selected, rather than balanced and neutral, basis that would tend to influence the decision of the borrower. This may arise where

PERG 4.6.21G01/07/2005

Scripted questioning involves using any form of sequenced questions in order to extract information from a person with a view to facilitating the selection by that person of a mortgage or other product that meets his needs. A decision tree is an example of scripted questioning. The process of going through the questions will usually narrow down the range of options that are available. Scripted questions must be prepared in advance of their actual use.

DISP App 1.3.2G06/04/2008

12In practice, it is likely to be appropriate for a complainant whose complaint has been upheld to convert to a repayment mortgage, whether or not there is financial loss to date. It will normally be possible for complainants to do so without incurring unreasonable cost. Conversion will of course mean that the complainant no longer has a policy.

DISP App 1.3.4G06/04/2008

21Firms should make it clear that they will bear the costs of conversion if the rearrangement is made with the existing lender and to the equivalent repayment mortgage. If a complainant is not willing to rearrange with the existing lender, then the costs to be paid by the firm should normally be limited to those which would have been payable had the rearrangement been made with the existing lender and to the equivalent repayment mortgage. If it is not possible to rearrange with

DISP App 1.3.5G06/04/2008

21If the "new" mortgage is, in fact, arranged at a lower interest rate than the existing loan, the benefit to the complainant should usually be disregarded, as it is always open to complainants to change their underlying mortgage arrangements at any time.

DISP App 1.3.6G06/04/2008

12If the "new" mortgage is arranged at a higher interest rate than the existing loan, the increased payment should not normally be taken into account in calculating any payment to be made to the complainant.

DISP App 1.3.7G06/04/2008

12If the complainant takes the opportunity to increase his loan on the occasion of the remortgage, the expenses which a firm pays by way of compensation should be paid by reference to the capital sum due under the "old" loan.

DISP App 1.3.10G06/04/2008

12In the event that a complainant is willing to pursue this option, a firm should first have assessed the complainant's loss using the approach set out in this appendix, and the minimum amount the complainant should receive under such a sale arrangement is the sum representing the position the complainant should have been in under this appendix together with the reimbursement of remortgaging costs. In order to ensure the process does not delay the provision of redress, the firm

DISP App 1.3.11G06/04/2008

1 2Example of assessment set out at 1.3.10

The following example illustrates the position:
Surrender value	£10,000	TEP value	£16,000
Loss calculated by standard approach	£5,000
Remortgaging costs	£300
Total	£15,300
Complainant receives £16,000 all ultimately funded from the TEP sale.
Surrender value	£10,000	TEP value	£13,000
Redress calculated by standard approach	£5,000
Remortgaging costs	£300
Total	£15,300
Complainant receives £15,300, £13,000 ultimately funded from the TEP sale and £2,300 ultimately funded from the firm.

MCOB 7.6.9R31/10/2004

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 'mortgage' where appropriate throughout the titles and text of the illustration;(3) include an additional section headed: 'Total borrowing' and numbered '7a' after Section 7, including the following text:(a) "This section gives you information about how your mortgage will be affected by taking out this

MCOB 7.6.11G31/10/2004

For the purposes of MCOB 7.6.9 R(3) and (4):(1) a customer's existing mortgage includes a mortgage entered into prior to 31 October 2004 as well as a regulated mortgage contract;(2) the frequency of payments is that in MCOB 5.6.40 R; and (3) a firm may generally rely on information provided by the customer unless, taking a common-sense view of this information, it has reason to doubt it.

MCOB 7.6.13R31/10/2004

Where not all of the mortgage interest rates described in accordance with MCOB 5.6.25 R(2)(a) apply for the term of the loan part to which they apply, the firm must disclose the amount that will be paid in each instalment when complying with MCOB 7.6.9 R(3)(b), including the following information:(1) when a change in payment will occur;(2) the reason for the change in payment; and(3) confirmation that the payment illustrated assumes rates will not change.

MCOB 7.6.15G31/10/2004

MCOB 7.6.14 R allows the firm to make changes to wording and to add, remove or alter information that would otherwise be misleading for the customer. For example, the firm may add text to let the customer know if conditions applying to the original mortgage do not apply to the additional borrowing, such as 'The early repayment charges applying to your existing loan do not apply to this additional borrowing.'

MCOB 7.6.16R01/04/2013

(1) (In the case of a business illustration), MCOB 5.6.16 R is replaced with the following: "Section 1: 'About this illustration' Under the section heading 'About this illustration', the following text must be included:'We are required by the Financial Conduct Authority (FCA) - the independent watchdog that regulates financial services - to provide you with this illustration.' "(2) (In all other cases), MCOB 5.6.16 R is replaced with the following; "Section 1: 'About this illustration'

MCOB 7.6.17R31/10/2004

(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

MCOB 9.4.24R06/04/2007

Under the section heading "Description of this mortgage" the illustration must:(1) state the name of the mortgage lender providing the lifetime mortgage7 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 lifetime mortgage;777(2) include a statement describing the lifetime mortgage;77(3) if the lifetime mortgage7 is linked to an investment, and payments required

MCOB 9.4.50R31/10/2004

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

MCOB 9.4.64R31/10/2004

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

MCOB 9.4.69R31/10/2004

(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)

MCOB 9.4.74G31/10/2004

Firms are reminded that MCOB 5.4.23 R requires a firm to provide a customer with an accurate quotation for any tied products. Where the level of cover the firm requires the customer to take up is known at the outset, then the quotation should reflect that level of cover.

MCOB 9.4.76R06/04/2007

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 lifetime mortgage7 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

MCOB 9.4.77G31/10/2004

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

MCOB 9.4.124G31/10/2004

MCOB 2.3.7 R requires any material inducements provided by a mortgage lender, whether directly or indirectly, to a mortgage intermediary or third party (unless the payment only reflects the cost of outsourcing work relating to the processing of mortgage applications by a firm unconnected to the mortgage intermediary) to be quantified in cash terms, which will enable the cash values to be included in the illustration in accordance with MCOB 9.4.123 R.1

MCOB 9.4.126R31/10/2004

This section must:(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) include the name, address and contact point of the firm providing the illustration.

MCOB 1.6.2G01/04/2013

Principle 2 requires a firm to conduct its business with due skill, care and diligence. The purpose of MCOB 1.6.3 R is to reinforce this. The FCA would expect firms to take appropriate steps to determine whether any mortgage it proposes to enter into is subject to FCA regulation.

MCOB 1.6.3R31/10/2004

Before a firm enters into a mortgage, it must take all reasonable steps to establish whether that mortgage will be a regulated mortgage contract and therefore subject to MCOB.

MCOB 1.6.4R01/04/2013

If, notwithstanding the steps taken by a firm to comply with MCOB 1.6.3 R, it transpires that a mortgage which the firm has treated as unregulated is in fact a regulated mortgage contract, the firm must as soon as practicable after the correct status of the mortgage has been established:(1) contact the customer and provide him with the following information in a durable medium:(a) a statement that the mortgage contract is a regulated mortgage contract subject to FCA regulation,

MCOB 1.6.5G01/04/2013

(1) MCOB 1.6.4 R(2) means, for example, that if a firm discovered immediately after completion that a loan was a regulated mortgage contract, the firm would be required to comply with MCOB 7.4 (Disclosure at the start of the contract).(2) Although MCOB 1.6.4 R recognises that firms may become aware that a mortgage is a regulated mortgage contract at a late stage, the FCA expects this to be an extremely rare occurrence. It could arise, for example, if a firm has acted on the understanding,

MCOB 9.7.2R06/04/2007

A firm that enters into a lifetime mortgage1 with a customer where interest payments are required (whether or not they will be collected by deduction from the income from an annuity or other linked investment product) must provide the customer with the following information before the customer makes the first payment under the contract:1(1) the amount of the first payment required;(2) the amount of the subsequent payments;(3) the method by which the payments will be collected

MCOB 9.7.4R06/04/2007

A firm that enters into a lifetime mortgage1 which is a drawdown mortgage, with fixed payments to the customer, must provide the customer with the following information before the first payment is drawn down by the customer:1(1) the amount of the first payment to be made;(2) the amount of subsequent payments, if different; (3) the method by which the payment will be made (for example, by transfer to the customer's bank account) and the date of issue of the first and subsequent

MCOB 9.7.6R06/04/2007

Where the lifetime mortgage1 is a drawdown mortgage and the customer can choose the amount and frequency of the payments they receive, or the amount and frequency of payments can vary for other reasons (for example in line with interest rates) the firm must provide the customer with the following information before the first payment is drawn down by the customer:1(1) (a) where the customer can choose the amount and frequency of the payments they receive, details of any limitations

MCOB 9.7.8R06/04/2007

Where thelifetime mortgage1 provides for a lump sum payment to be made to the customer, and all or part of the interest will be rolled up during the life of the mortgage, the firm must provide the customer with the following information before the customer makes the first payment under the contract, or if no payments are required from the customer, within seven days of completion of the mortgage:1(1) if no payments are required from the customer, confirmation that no payments

MCOB 9.8.1R06/04/2007

The statement required by MCOB 7.5.1 R must contain the following information:(1) except in the case of mortgage credit cards, information on the type oflifetime mortgage,3 (for example, fixed rate or variable rate) including a clear statement of how the firm expects the capital, or capital and interest (whichever is applicable) to be repaid (for example, from the proceeds of the sale of the property);3(2) details of the following transactions and information on the lifetime

MCOB 9.8.3R06/04/2007

A firm must give the customer reasonable notice, in advance, of any of the following:(1) any changes to the payments that the customer is required to make (where payments are required, and whether or not they are collected by deduction from the income provided by a linked investment product such as annuity) resulting from interest rate changes;(2) the exercising of the firm's right (if allowed by the terms of the lifetime mortgage3 ) to enter the property to carry out essential

MCOB 9.8.4G31/10/2004

Examples of where MCOB 7.6.5 R will apply are the release of tranches of money to the customer in relation to a self-build mortgage or other instalment mortgage, but not a drawdown mortgage.

MCOB 9.8.10R06/04/2007

If a customer requests, or agrees to, a change to a lifetime mortgage.3(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 paid to the customer under a drawdown mortgage, or the amount that the customer will owe under a roll-up of interest mortgage, or both, a firm must provide the customer with the following information, in a single communication, before the change takes effect:3(1) the amount outstanding on the

DISP App 1.4.1G06/04/2008

This section of this appendix is primarily concerned with circumstances where the term of the mortgage and associated endowment policy extend beyond the individual complainant's normal retirement age in circumstances where the firm regards a complaint as justified because the arrangement is not affordable in retirement; and this could have, and should have, been foreseen at the time of the advice.1212

DISP App 1.4.11G06/04/2008

12If a complaint is regarded as justified by the firm on the basis that the endowment policy maturity date extends beyond the mortgage term expiry date and the firm is responsible for this situation, the policy should be reconstructed so that it matures at the expiry of the mortgage term.

DISP App 1.4.14G06/04/2008

1 2Example 8

Example 8
Term extends beyond retirement age and policy reconstruction
Background
45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th policy anniversary.
It has always been the intention of the complainant to retire at State retirement age 65.
Term from date of sale to retirement is 20 years and the maturity date of the mortgage is 5 years after retirement.
Established facts
Established premium paid by investor on policy of original term (25 years):	£81.20
Premium that would have been payable on policy with term from sale to retirement (20 years):	£111.20
Actual policy value at time complaint assessed:	£12,500
Value of an equivalent 20-year policy at time complaint assessed:	£21,300
Difference in policy values at time complaint assessed:	£8,800
Difference in outgoings (20 year policy - 25 year policy):	£4,320
Basis of compensation
The policy is reconstructed as if it had been set up originally on a term to mature at retirement age, in this example, a term of 20 years. The difference in the current value of the policy actually sold to the complainant and the current value of the reconstructed policy, as if the premium on the reconstructed policy had been paid from outset, is calculated. The complainant has gained from lower outgoings (lower premiums) of the actual endowment policy to date. In calculating the redress, the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain.
Redress generally if it is not unreasonable to take account of the whole of the gain from lower outgoings
Loss from current value of reconstructed policy less current value of actual policy:	(£8,800)
Gain from total lower outgoings under actual policy:	£4,320
Net loss:	(£4,480)
Therefore total redress is:	£4,480
Redress if it is unreasonable to take account of gain from lower outgoings
Loss from current value of reconstructed policy less current value of actual policy:	(£8,800)
Gain from total lower outgoings under actual policy:	Ignored
Therefore total redress is:	£8,800
Additional Information
If the policy is capable of reconstruction, the complainant must now fund the higher premiums himself for the remainder of the term of the shortened policy until maturity. In this example the higher premium could be £111.20. However the firm should provide the complainant with a reprojection letter based on the reconstructed policy such that the actual monthly payment required to achieve the target sum could be even higher, say £130. The reprojection letter should set out the range of options facing the complainant to deal with the projected shortfall, if any.

DISP App 1.4.15G06/04/2008

1 2Example 9

Example 9
Term extends beyond retirement age: example of failure to explain investment risks
Background
45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th anniversary.
It has always been the intention of the complainant to retire at state retirement age 65.
Term from date of sale to retirement is 20 years and the maturity date of the mortgage is five years after retirement.
In addition, an endowment does not meet the complainant's attitude to investment risk and a repayment mortgage would have been taken out if properly advised.
Established facts
Surrender value (on the 25 year policy) at time complaint assessed:	£12,500
Capital repaid under repayment mortgage of term to retirement date (20 years):	£21,000
Surrender value less capital repaid:	(£8.500)
Difference in outgoings (repayment - endowment):	£5,400
Cost of converting from endowment mortgage to repayment mortgage:	£200
Basis of compensation:
The surrender value of the (25 year term) endowment policy is compared to the capital that would have been repaid to date under a repayment mortgage arranged to repay the loan at retirement age, in this example, a repayment mortgage for a term of 20 years. The complainant has gained from lower outgoings of the endowment mortgage to date. In calculating the redress, the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. The conversion costs are also taken into account in calculating the redress.
Redress generally
Loss from surrender value less capital repaid:	(£8,500)
Gain from total lower outgoings under endowment mortgage:	£5,400
Cost of converting to a repayment mortgage:	(£200)
Net loss:	(£3,300)
Therefore total redress is:	£3,300
Redress if it is unreasonable to take account of gain from lower outgoings
Loss from surrender value less capital repaid:	(£8,500)
Gain from total lower outgoings under endowment mortgage:	Ignored
Cost of converting to a repayment mortgage:	(£8,700)
Therefore total redress is:	£8,700

MIPRU 4.3.3R06/04/2007

For a firm which carries on insurance mediation activity or home finance mediation activity1, annual income is the amount of all brokerage, fees, commissions and other related income (for example, administration charges, overriders, profit shares) due to the firm in respect of or in relation to those activities.1

MIPRU 4.3.7R06/08/2008

For the purposes of the calculation of the capital resources of a firm carrying on home finance administration1only with all the assets it administers off balance sheet, annual income is the sum of:11(1) revenue (that is, commissions, fees, net interest income, dividends, royalties and rent); and(2) gains;(3) arising in the course of the ordinary activities of the firm, less profit:(a) on the sale or termination of an operation;(b) arising from a fundamental reorganisation or

MCOB 5.4.16G06/04/2007

MCOB 5.4.13 R places no restrictions on the provision of information that is not specific to the amount the customer wants to borrow, for example, marketing literature including generic mortgage repayment tables or graphs illustrating the benefits of making a regular overpayment on a flexible mortgage. Such literature may, however, constitute a financial promotion2 and be subject to the provisions of MCOB 3 (Financial promotion).2

BIPRU 4.10.6R01/01/2007

(1) Residential real estate property which is or will be occupied or let by the owner or the beneficial owner in the case of personal investment companies and commercial real estate property, that is offices and other commercial premises, may be recognised as eligible collateral where the conditions set out in the remaining provisions of this paragraph are met.(2) The value of the property must not materially depend upon the credit quality of the obligor. This requirement does

BIPRU 4.10.9R01/01/2007

(1) The condition in BIPRU 4.10.6 R (3) does not apply for exposures secured by residential real estate property situated within the territory of another EEA State.(2) However (1) only applies if and to the extent that the CRD implementation measures for that EEA State in relation to the IRB approach implement the option set out in paragraph 16 of Part 1 of Annex VIII of the Banking Consolidation Directive (waiver for residential real estate property) with respect to residential

BIPRU 4.10.10R01/01/2007

(1) The condition in BIPRU 4.10.6 R (3) does not apply for commercial real estate property situated within the territory of another EEA State.(2) However (1) only applies if and to the extent that the CRD implementation measures for that EEA State in relation to the IRB approach implement the option set out in paragraph 17 of Part 1 of Annex VIII of the Banking Consolidation Directive (waiver for commercial real estate property) with respect to commercial real estate property

BIPRU 4.10.11R01/01/2007

A firm may also recognise as eligible collateral shares in Finnish residential housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation in respect of residential property which is or will be occupied or let by the owner, as residential real estate collateral, provided that the conditions in BIPRU 4.10.6 R are met.[Note: BCD Annex VIII Part 1 point 14]

PERG 2.7.7CG06/04/2007

Further guidance on the arranging activities as they relate to home finance transactions and contracts of insurance is in PERG 4.5 (Arranging regulated mortgage contracts), PERG 14.3 and PERG 14.4 (Guidance on home reversion and home purchase activities)3 and PERG 5.6 (The regulated activities: arranging deals in, and making arrangements with a view to transactions in, contracts of insurance) respectively.3

DISP App 1.6.8G06/04/2008

34The principles set out above (in DISP App 1.6.1 G to DISP App 1.6.7 G) should be applied directly to mortgage endowment complaints where the capital loss is calculated by comparing the surrender value of the endowment policy with the capital which would have been repaid using a repayment mortgage.

DISP App 1.6.9G06/04/2008

34In most cases where there is a loss, the endowment policy will be surrendered and put towards the cost of setting up a suitable repayment mortgage. Where this is the case, that part of the surrender value relating to the windfall augmentation should be paid as a cash lump sum to the investor or to the investor's order as part of the redress package. Only that part of the surrender value which does not relate to the windfall augmentation should be put towards the cost of setting

MCOB 4.1.2R30/06/2010

This table belongs to MCOB 4.1.1 R

(1) Category of firm	(2) Applicable section
mortgage lender	MCOB 4.1 to MCOB 4.4, and MCOB 4.8 to MCOB 4.94 4 3
mortgage adviser	whole chapter exceptMCOB 4.104
mortgage arranger	whole chapter except MCOB 4.7 and MCOB 4.104
4 home purchase provider	MCOB 4.1, MCOB 4.2 and MCOB 4.10 (except MCOB 4.10.5 G to MCOB 4.10.7 G). MCOB 4.3, MCOB 4.4 and MCOB 4.8 in accordance with MCOB 4.10
4 home purchase adviser	MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.10.MCOB 4.3, MCOB 4.4, MCOB 4.7 and MCOB 4.8 in accordance with MCOB 4.10
4 home purchase arranger	As for a home purchase adviser exceptMCOB 4.10.5 G to MCOB 4.10.7 G and MCOB 4.7 do not apply
4 reversion provider reversion adviser reversion arranger	see MCOB 8for the application of this chapter5
5 SRB adviser	MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.11
5 SRB arranger	MCOB 4.1, MCOB 4.2, MCOB 4.5, MCOB 4.6 and MCOB 4.11
5 SRB agreement provider	MCOB 4.1, MCOB 4.2 and MCOB 4.11

MCOB 4.1.5R06/04/2007

In relation to an equity release transaction,4 this chapter 4 is modified by MCOB 8 (Equity release4: advising and selling standards).244

MCOB 8.3.1AG06/04/2007

3The rules and guidance that are not relevant to home reversion plans are those related, for example, to interest rates, APR, higher lending charge, mortgage credit cards, multi-part mortgages and foreign currency mortgages.

FEES 6.7.6R01/04/2013

If a firm ceases to be a participant firm or carry out activities within one or more classes54 part way through a financial year4 of the compensation scheme:4(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and41(2) the FSCS may make one or more levies4 upon it (which may be before or after the firm5 has ceased to be a participant firm or carry out activities within one or more classes5,4 but must be before it ceases to be an authorised

PERG 8.14.40ADG06/10/2010

6Article 72D exempts any financial promotion made by an employer to an employee in relation to a staff mortgage. This is subject to certain requirements as follows:(1) where the provider of the staff mortgage is an undertaking in the same group as the employer, the employer must not receive or have received, any direct financial benefit (including any commission, discount, remuneration or reduction in premium) as a result of making the communication; and(2) where the communication

PERG 8.14.40AEG06/10/2010

6Article 72E exempts any financial promotion made to an employee by or on behalf of a person (“A”) in relation to a staff mortgage. This is subject to certain requirements as follows:(1) the employer and A must have entered into a written contract specifying the terms on which the communication may be made;(2) in the case of a communication made by a person (“B”) on behalf of A, A and B must also have entered into a written contract specifying the terms on which the communication

PERG 8.14.40AFG06/10/2010

6The exemptions described in PERG 8.14.40A G to PERG 8.14.40AE G should enable employers (and their contracted service providers) to promote employee benefits packages that include any pension schemes, work-related insurance schemes and staff mortgages to employees without undue concern that they may be breaching the restriction in section 21 of the Act. PERG 8.14.34 G (Communications by employers and contracted service providers to employees) has further guidance about the application

Related provisions for MCOB 7.6.6

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An example of how the information required by MCOB 5.6.52 R (1), MCOB 5.6.52 R (3) and MCOB 5.6.52 R (5) may be presented is as follows:

This table belongs to MCOB 4.1.1 R