Our supervisory approach to certain mortgage disclosure requirements.
To support the implementation of the Government’s Mortgage Charter[1] we introduced changes to our rules to enable firms to allow mortgage borrowers to:
- reduce their capital repayments (including to zero, and paying interest only) for up to 6 months
- fully or partly reverse a term extension within 6 months of extending the term
The new rules enable firms to vary a mortgage contract in this way without assessing affordability.
Using these new provisions, signatories to the Government’s Mortgage Charter can meet one of the commitments made within it.
Where a contract is varied in a way which changes the payment due there is a longstanding requirement that firms give the borrower personalised information before the change takes effect (MCOB 7.6.28R[2]). This is important to enable consumers to make an informed choice when agreeing to a variation.
We recognise the urgency with which firms are seeking to deliver their Charter commitments. We understand that some firms’ systems might not, at present, allow them to meet these requirements in full when fulfilling their commitments under the Charter.
We will therefore allow firms time to bring their systems into compliance where they are currently unable to provide the disclosure required under MCOB 7.6.28R, when giving effect to these two new options (MCOB 11.6.3(3)(a) and (b)[3]).
Where a firm cannot fulfil the disclosure requirement it should provide as much of the required disclosure as possible, in a durable medium. Firms should make clear the implications and risks associated with either option and take all reasonable steps to support the customer to make an informed choice, so they can understand the features, potential costs and benefits of the option they choose, before the change takes effect.
It is important that all firms who are not currently in a position to comply with our rules take prompt action to address this. We expect lenders to have introduced a compliant approach with respect to MCOB 11.6.3(3)(a) and (b) and MCOB 7.6.28R as soon as possible, and in any event by the end of January 2024.
Our rules remain in force during this period. Non-compliant firms will be in breach of our rules, notwithstanding this regulatory forbearance. We will follow up with firms to confirm their compliance through routine supervision. During this period, our supervisory approach will be proportionate where firms take all reasonable steps to give as much of the required disclosure as possible.
Firms may need to consider the disclosure implications (including market disclosure) of any non-compliant systems.
Firms should address any questions to their usual Supervision contact.