Regulatory AlertsPS23/8: Mortgage Charter enabling provisions
The UK Financial Conduct Authority amended its MCOB sourcebook to implement the Government’s Mortgage Charter by allowing mortgage lenders to offer temporary payment relief without new affordability assessments. These changes permit borrowers to reduce capital repayments for up to six months or reverse term extensions within six months, provided they receive sufficient information to make informed choices. The rule changes took effect on 30 June 2023 to help financially stretched borrowers manage rising interest rates and will be reviewed within twelve months.
We’re amending our Mortgages and Home Finance: Conduct of Business (MCOB) sourcebook to support the implementation of the Government’s Mortgage Charter.
Read PS23/8 (PDF)
What we are changing
We are introducing changes to our Handbook 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
Both options may now be offered without a new affordability assessment.
The changes we are making aim to secure an appropriate degree of protection for consumers by enabling lenders to offer their customers swift, temporary reductions in payments and for customers to make an informed choice on their options.
Firms will need to ensure customers are provided with sufficient information to support their decision.
Who this is for
This policy statement applies to:
mortgage lenders and administrators
home purchase providers and administrators
It may also be of interest to:
industry groups and trade bodies
credit reference agencies
consumer groups
individual customers
Next steps
The rule changes take effect from 30 June 2023. Firms may begin using these exemptions from that date.
We will review the impact of the rule changes within 12 months.
Background
These measures support the implementation of the commitments made under the government’s new Mortgage Charter .
All borrowers are having to manage financial challenges from the increased cost of living.
Over the next year we expect many borrowers will face a significant increase in their monthly mortgage payments due to the rising cost of increased interest rates. We project that the biggest increase in the number of ‘financially stretched’ borrowers will occur between July and September 2023.
Given this, and the number of consumers affected, we are introducing these changes to our Handbook without consultation.
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