Emma RadmoreFollowing its short consultation, the FCA has finalised the package of measures that will achieve the first stage of the planned mortgage reforms. The changes address primarily remortgaging and will make it easier for borrowers to:
- reduce their mortgage term;
- remortgage with another lender; and
- discuss their options with a lender and get appropriate advice.
The FCA has made few changes from the version of the rules it consulted on. The key changes now in force are:
- there is no longer any “interaction trigger” at MCOB 4.8A7R(3) and its associated rules and guidance – which means that firms will not automatically have to give advice when there is any interaction with the customer, so customers can get the information they want and need and also get advice when needed. The rules now include an obligation on firms to consider how to identify execution-only customers who might need advice, and the FCA says this is part of a firm considering its obligations under the Consumer Duty. Following feedback, the rules now clarify that consumers must confirm they are aware of the protections they lose if they proceed with an execution-only sale, to mitigate the risk of borrowers thinking they have been advised when they have not been;
- while firms will need to consider affordability when reducing a mortgage term in line with the Duty and their responsible lending policy, they no longer have to carry out a full affordability assessment in these circumstances; and
- the modified affordability assessment will include new mortgage contracts with new lenders where it is more affordable than a customer’s current mortgage or a new product available from their current lender.
The FCA has also withdrawn outdated non-handbook guidance.
The changes take immediate effect on 22 July, but the FCA says it knows firms that want to use them will need time to implement them, so it does not expect customers to be able to benefit from the new flexibilities immediately.