Mortgages (Responsible Lending) Instrument 2019

Following consultation CP19/14, the FCA published the Mortgages (Responsible Lending) Instrument (together with feedback to the consultation) 28 October 2019.

The final rules (which come into force immediately) set out the conditions for using the modified affordability assessments and include three new obligations of mortgage lenders to (1) communicate, (2) inform and (3) report.

  • modified affordability assessments can be used where a consumer:
    • has a current mortgage
    • is up to date with their repayments
    • does not want additional borrowing (other than to accommodate any fees)
    • is looking to switch to a new mortgage on their current property.
  • inactive lenders and administrators acting for unregulated entities must do a review of their customer base to identify customers who these changes are relevant to and proactively communicate to those customers in a durable medium.  This notice should be sent in good time prior to 1 September 2020 and must:
    • include a statement to the effect that it has recently become simpler for a customer to enter into a more affordable mortgage with another lender if the customer is not looking to borrow any more than they currently owe under their mortgage and has kept up to date with their mortgage over the last 12 months; and
    • refer the customer to sources of information about how to switch
  • where mortgage lenders use the modified assessment, they must inform customers of the basis on which their affordability has been assessed.
  • mortgage lenders must report sales which have involved the modified assessment when they submit their PSD to the FCA.

Caroline Stevenson