MCOB 5A Annex 2 Instructions to complete the ESIS

MCOB 5A Annex 2R

[Note: Annex II Part B of the MCD]

1.1

R

This Annex belongs to MCOB 5A.5.3R (3).

1.2

R

Where a MCD regulated mortgage contract is divided into more than one part, the firm must set out the required ESIS content in respect of each part.

1.3

R

Unless otherwise specified, the sections referred to in this Annex are sections in the ESIS.

1.4

R

Where the form includes the following words and phrases in round brackets:

(1)

“repaid” (in sections 3 and 7);

(2)

“right to” (in sections 9 and 10);

(3)

“early repayment charge” (in section 9);

the firm may use that word or phrase instead of the one immediately before it.

(4)

MCOB 5A Annex 2, 5.7R(3), 9.1R(2), 11.2R(3) and 12.1R(2) explain this in more detail.

2

Section ‘Introductory text’

2.1

R

(1)

The firm must properly highlight the validity date.

(2)

For the purpose of (1), the ‘validity date’ means the length of time the information, eg, the borrowing rate, contained in the ESIS will remain unchanged and will apply should the MCD mortgage lender grant the MCD regulated mortgage contract within this period of time.

(3)

Where the determination of the applicable borrowing rate and other costs depends on the results of the selling of underlying bonds, the eventual borrowing rate and other costs may be different from those stated. In those circumstances only, the firm must stipulate that the validity date does not apply to the borrowing rate and other costs by adding the words: ‘apart from the interest rate and other costs’.

3

Section ‘1. Lender’

3.1

R

(1)

The firm must provide the name, telephone number and geographical address of the MCD mortgage lender.

(2)

The information provided under (1) must be the contact information that the consumer may use for future correspondence.

3.2

G

The firm need not provide the MCD mortgage lender's email address, fax number, web address or contact person/point.

3.3

R

Where the MCD regulated mortgage contract is offered at a distance, the firm must, where applicable, provide the name and geographical address of the MCD mortgage lender's representative in the EEA State where the consumer is resident.

3.4

G

The firm need not provide the telephone number, email address or web address of the MCD mortgage lender's representative referred to at MCOB 5A Annex 2, 3.3R.

3.5

R

Where section 2 does not apply, an MCD mortgage lender must inform the consumer whether advisory services are being provided and on what basis using the wording at the end of section 1 of MCOB 5A Annex 1 R.

4

(Where there is a credit intermediary who is not the lender2) Section ‘2. Credit intermediary’

4.1

R

Where an MCD mortgage credit intermediary (other than the lender)2 provides an ESIS to a consumer, the MCD mortgage credit intermediary must include the following information:

(1)

the name, telephone number and geographical address of the MCD mortgage credit intermediary;

(2)

whether the MCD mortgage credit intermediary is providing advisory services and on what basis, using the wording at the end of section 2 of MCOB 5A Annex 1 R; and

(3)

an explanation of how the MCD mortgage credit intermediary is being remunerated.

4.2

R

The information provided under MCOB 5A Annex 2, 4.1R(1) must be the contact information that the consumer may use for future correspondence.

4.3

R

The explanation provided under MCOB 5A Annex 2, 4.1R(3) must include:

(1)

where the MCD mortgage credit intermediary receives commission from an MCD mortgage lender, the amount of that commission;

(2)

where the MCD mortgage lender from whom the MCD mortgage credit intermediary receives commission is different from the MCD mortgage lender referred to section 1, the name of that MCD mortgage lender; and

(3)

where the amount of remuneration is not known at the time when the ESIS is provided, a range of representative examples.

4.4

R

The explanation provided under MCOB 5A Annex 2, 4.1R(3) must not include remuneration paid to a third party.

4.5

R

An MCD mortgage credit intermediary need not provide its email address, fax number, web address or contact person/point.

4.6

G

In the event that an MCD mortgage lender provides a consumer with a binding offer and the characteristics of the offer are different from the information in the ESIS previously provided by the MCD mortgage credit intermediary, if the MCD mortgage credit intermediary confirms to the MCD mortgage lender that the revised transaction can proceed, the MCD mortgage lender may complete section 2 and update the wording referred to at MCOB 5A Annex 2, 4.1R(2) to say “[Name of credit intermediary] recommends .../ [Name of credit intermediary] is not recommending...” instead of “We recommend .../We are not recommending”.

5

Section ‘3. Main features of the loan’

5.1

R

In section 3, the firm must clearly explain the main characteristics of the MCD regulated mortgage contract, including the value and currency and the potential risks associated with the borrowing rate, including the ones referred to in MCOB 5A Annex 2, 5.7R, and the amortisation structure.

5.2

R

Where the currency of the MCD regulated mortgage contract is different from the national currency of the consumer, the firm must:

(1)

indicate that the consumer will receive a regular warning at least when the exchange rate fluctuates by more than 20 %;

(2)

where there is a provision in the MCD regulated mortgage contract to limit the exchange rate risk, indicate the maximum amount the consumer could have to pay back;

(3)

where there is no provision in the MCD regulated mortgage contract to limit the exchange rate risk to which the consumer is exposed to a fluctuation in the exchange rate of less than 20 %, provide an illustration of the effect of a 20 % fall in the value of consumer's national currency relative to the currency of the MCD regulated mortgage contract on the value of the MCD regulated mortgage contract;

(4)

where applicable, indicate that the consumer has the right to convert the currency of the MCD regulated mortgage contract;

(5)

where applicable, indicate to the consumer the right to renegotiate the conditions of the MCD regulated mortgage contract; and

(6)

indicate any other arrangements available to the consumer to limit his exposure to exchange rate risk.

5.3

R

(1)

The firm must express the duration of the MCD regulated mortgage contract in years and months (or a combination of the two), whichever is the most relevant.

(2)

Where the duration of the MCD regulated mortgage contract can vary during the lifetime of the MCD regulated mortgage contract, the firm must explain when and under which conditions this can occur.

(3)

Where the MCD regulated mortgage contract is open-ended, for example, for a secured credit card, the firm must clearly state that fact.

(4)

Where the MCD regulated mortgage contract is an MCD lifetime mortgage, the duration of the mortgage must be estimated in accordance with MCOB 9.4.10 R, as if the mortgage is an MCD exempt lifetime mortgage.

5.4

R

(1)

The firm must clearly indicate the type of MCD regulated mortgage contract (eg, mortgage credit, home loan, secured credit card).

(2)

The description under (1) must clearly indicate how the capital and the interest shall be repaid during the life of the MCD regulated mortgage contract (ie, the amortisation structure), specifying clearly whether the MCD regulated mortgage contract is on a capital repayment or interest-only basis, or a mixture of the two.

5.5

R

Where all or part of the MCD regulated mortgage contract is an interest-only MCD regulated mortgage contract, the firm must insert a statement, clearly indicating that fact, prominently at the end of section 3 using the wording in section 3 of MCOB 5A Annex 1 R.

5.6

R

(1)

In section 3, the firm must explain whether the borrowing rate of the MCD regulated mortgage contract is fixed or variable and, where applicable, the periods during which it will remain fixed; the frequency of subsequent revisions and the existence of limits to the borrowing rate variability, such as caps or floors.

(2)

The firm must explain the formula used to revise the borrowing rate and its different components (eg, reference rate, interest-rate spread).

(3)

The firm must indicate (eg, by means of a web address) where further information on the indices or rates used in the formula referred to in (2) can be found (eg, Euribor or central bank reference rate).

(4)

If different borrowing rates apply in different circumstances, the firm must provide the information required by (1), (2) and (3) on all applicable rates.

5.7

R

(1)

The ‘total amount to be repaid’ corresponds to the total amount payable by the consumer. The firm must show this as the sum of the credit amount and the total cost of the credit to the consumer.

(2)

Where the borrowing rate is not fixed for the duration of the MCD regulated mortgage contract, the firm must highlight that the amount in (1) is illustrative and may vary, in particular in relation with the variation in the borrowing rate.

(3)

The firm may replace “reimbursed” with “repaid” (shown in round brackets), ie, “Total amount to be repaid”.

5.8

R

(1)

Where the credit will be secured by an MCD regulated mortgage contract, another comparable security or by a right related to land, the firm must draw the consumer's attention to this.

(2)

Where applicable, the firm must indicate the assumed value of the land or other security used for the purpose of preparing the ESIS.

5.9

G

In order for the firm to comply with the principle of 'fair, clear and not misleading' in MCOB 3A.2.1R(1), where the assumed value is not a value provided by the consumer, the valuation must be a reasonable assessment based on all the facts available at the time. For example, an overstated valuation could enable a more attractive MCD regulated mortgage contract to be illustrated on the basis of a lower ratio of the loan amount to the property value - for example, one with a lower rate of interest or without a higher lending charge.

5.10

R

The firm must indicate, where applicable, either:

(1)

The ‘maximum available loan amount relative to the value of the property’, indicating the loan-to-value ratio. This ratio must be accompanied by an example in absolute terms of the maximum amount that can be borrowed for a given property value; or

(2)

the ‘minimum value of the property required by the firm to lend the illustrated amount’.

5.11

R

Where an MCD regulated mortgage contract has more than one part (eg, concurrently part fixed rate, part variable rate), the firm must indicate this and must provide the information required by section 3 for each part.

5.12

R

The amount of the loan to be granted is:

(1)

in cases where, on the basis of the information obtained from the consumer, before providing the ESIS it is clear that the consumer would not be eligible to borrow the amount he requested, an estimate of the amount that the consumer could borrow based on the information obtained from the consumer. This does not require information to be obtained from the consumer before providing an ESIS to ascertain the amount the consumer is eligible to borrow, instead, this means that the firm does not have to provide a consumer with an ESIS for an amount it knows the consumer would not be eligible for, based on whatever information it has obtained from the consumer before providing the ESIS; or

(2)

where the MCD regulated mortgage contract is a revolving credit agreement, such as a secured overdraft or mortgage credit card, the total borrowing that the firm is willing to provide under the MCD regulated mortgage contract; or

(3)

where it is known that the loan will be released in instalments, for example, in the case of a self-build mortgage:

(a)

where the lender has made a binding offer for the full amount, the total amount of the loan required and not the amount of the initial instalment;

(b)

where the lender has made a binding offer for an initial amount, the initial amount; and

(c)

where the lender’s binding offer for an initial amount has been replaced by a binding offer for a larger amount, the larger amount.

6

Section ‘4. Interest rate’ and other costs

6.1

R

The reference to ‘interest rate’ corresponds to the borrowing rate or borrowing rates.

6.2

R

The firm must state the borrowing rate as a percentage value.

6.3

R

(1)

Where the borrowing rate is variable and based on a reference rate, the firm may indicate the borrowing rate by stating a reference rate and a percentage value of the MCD mortgage lender's spread.

(2)

The firm must state the value of the reference rate in (1) as at the day it issues the ESIS.

6.4

R

Where the borrowing rate is variable, the firm must include:

1)

the assumptions used to calculate the APRC;

(2)

where relevant, the applicable caps and floors; and

(3)

a warning that the variability could affect the actual level of the APRC.

6.5

R

In order to attract the consumer's attention the firm must:

(1)

use a font size for the warning required by MCOB 5A Annex 2, 6.4R(3) that is bigger than the font size it uses for the rest of the ESIS;

(2)

ensure that warning required by MCOB 5A Annex 2, 6.4R(3) figures prominently in the main body of the ESIS.

6.6

R

(1)

The firm must accompany the warning required by MCOB 5A Annex 2, 6.4R(3) with an illustrative example of the APRC.

(2)

Where there is a cap on the borrowing rate, the example required by (1) must assume that the borrowing rate rises at the earliest possible opportunity to the highest level foreseen in the MCD regulated mortgage contract.

(3)

Where there is no cap, the example required by (1) must illustrate the APRC at the highest borrowing rate in at least the last 20 years. Or, where the underlying data for the calculation of the borrowing rate is available for a period of less than 20 years, the longest period for which such data is available, based on the highest value of any external reference rate used in calculating the borrowing rate, where applicable, or the highest value of a benchmark rate specified by the FCA or another competent authority or the European Banking Authority where the MCD mortgage lender does not use an external reference rate.

(4)

The requirement under (1) does not apply to an MCD regulated mortgage contract where the borrowing rate is fixed for a material initial period of several years and may then be fixed for a further period following negotiation between the MCD mortgage lender and the consumer.

(5)

For an MCD regulated mortgage contract within (4), the firm must include a warning that the APRC is calculated on the basis of the borrowing rate for the initial period.

(6)

The firm must accompany the warning required by (5) with 1an additional, illustrative APRC calculated in accordance with MCOB 10A.1.5R1.

6.7

R

(1)

Where the credit secured by an MCD regulated mortgage contract is a multi-part credit (eg, concurrently part fixed rate, part variable rate), the firm must provide the information about the borrowing rate required by MCOB 5A Annex 2, 6 for each part of the credit.

(2)

Where the credit secured by an MCD regulated mortgage contract is a multi-part credit, the firm must calculate and provide the additional illustrative APRC required by MCOB 5A Annex 2, 6 once in respect of the entire MCD regulated mortgage contract.

6.8

R

The FCA's benchmark rate is the difference in percentage points between the Bank of England’s base rate on the date the ESIS is issued and the highest value of the Bank of England’s base rate over at least the last 20 years, added to the borrowing rate shown in the ESIS.

6.9

R

When more than one interest rate applies during the term of the MCD regulated mortgage contract, for example, because there is an initial fixed or discounted interest rate period, the firm must calculate the FCA's benchmark rate by reference to the reversionary borrowing rate shown in the ESIS.

6.10

G

When calculating the FCA's benchmark rate, the firm may:

(1)

calculate the last 20 years from up to three months prior to the date the ESIS is issued; and

(2)

extend the period for calculating the FCA's benchmark rate beyond the last 20 years to any period longer than 20 years.

6.11

R

In the event of a scenario in column (1) in the table MCOB 5A Annex 2, 6.12R, the firm must calculate the illustrative example of the APRC (the additional APRC) in accordance with column (2) of that table.

6.12

R

This table belongs to MCOB 5A Annex 2, 6.11R.

(1) Scenario

(2) Calculation of additional APRCNB: A MCD mortgage lender's standard variable rate is not to be used as an external reference rate (ERR)

Mortgage with an interest-rate cap

Calculate the APRC based on the borrowing rate rising at the earliest possible opportunity to the level of the cap.

Where the product is not linked to an ERR

Use the FCA's benchmark rate.

MCD mortgage lender uses an ERR and has 20 years of data relating to the margin applied by the MCD mortgage lender

Use the highest ERR in the previous 20 years, and apply the highest margin over that or lowest margin under it, to produce the highest additional APRC.

MCD mortgage lender uses an ERR and has less than 20 years of data relating to the margin applied by the MCD mortgage lender

Use the highest ERR in the previous 20 years, and apply the highest margin over that or lowest margin under it, used in the period of data available, to produce the highest additional APRC.

MCD mortgage lender comprises a group which contains separate legal entities or comprises distinct product brands and has 20 years of data relating to the margin applied by that legal entity or product brand. It may have similar products across entities or brands within the same group or company with different margins above or below the ERR.

Use the highest ERR in the previous 20 years with respect to the pricing approach for the specific legal entity or product brand and apply the highest margin over that or lowest margin under it to produce the highest additional APRC.

MCD mortgage lender comprises a group which contains separate legal entities or comprises distinct product brands and has less than 20 years of data relating to the margin applied by that legal entity or product brand. It may have similar products across entities or brands within the same group or company with different margins above or below the ERR.

Use the highest ERR in the previous 20 years with respect to the pricing approach for the specific legal entity or product brand and apply the highest margin over that or lowest margin under it used in the period of data available to produce the highest additional APRC.

MCD mortgage lender has previously purchased a brand that uses an ERR and has 20 years of data relating to the margin applied by the MCD mortgage lender for the same product

Where the purchaser is carrying on new lending under the purchased brand - same as above, using previous firm's data where relevant and where it may be reasonably obtained.

MCD mortgage lender has previously purchased a brand that uses an ERR and has less than 20 years of data relating to the margin applied by the MCD mortgage lender for the same product

Where the purchaser is carrying on new lending under the purchased brand - same as above, using previous firm's data, where relevant and where it may be reasonably obtained. Otherwise, use the FCA's benchmark rate.

MCD mortgage lender has different ERR calculation methods that apply over time (eg, 0.5% over Bank of England rate for the first two years and then 2% over Bank of England rate for the rest of the mortgage lifetime).

Calculate using the method which produces the highest additional APRC.

MCD mortgage lender has different methods that apply to different proportions of the principal (eg, ERR + x% applies to 50% principal and SVR applies to the other 50%)

Calculate using the ERR where applicable and the FCA's benchmark rate, where applicable, and use both to calculate the additional APRC.

MCD mortgage lender uses an ERR where its basis has changed in the past 20 years

Consider whether there was an equivalent predecessor ERR and use the ERR (and its equivalent predecessor(s), if any) provided that it (or they) have existed at least 20 years, otherwise use the FCA's benchmark rate.

MCD mortgage lender has an ERR calculation method that applies for a fixed period of time after which the lender’s standard variable rate applies (eg, 0.5% over Bank of England rate for the first two years and then the lender’s standard variable rate applies for the rest of the mortgage lifetime).

Calculate using the method which produces the highest additional APRC.

6.13

R

(1)

The firm must list all the costs other than the borrowing rate in the section on ‘other components of the APRC’, including one-off costs, such as administration fees, and regular costs, such as annual administration fees.

(2)

the firm must list each of the costs referred to in (1) by the categories set out in in (3) and indicate for each cost:

(a)

the amount;

(b)

to whom the cost is to be paid; and

(c)

when the cost is to be paid.

(3)

The categories referred to in (1) are:

(a)

costs to be paid on a one-off basis;

(b)

costs to be paid regularly and included in the instalments; and

(c)

costs to be paid regularly but not included in the instalments.

(4)

Where the amount in (2)(a) is not known, the firm must provide an indication of the amount if possible or, if not possible, how the amount will be calculated and specify that the amount provided is indicative only.

(5)

The firm must highlight where certain costs are not included in the APRC because they are unknown to the firm.

6.14

G

The costs in MCOB 5A Annex 2, 6.13R(1) need not include costs incurred for breaches of contractual obligations.

6.15

R

Where a consumer has informed the firm of one or more components of his preferred MCD regulated mortgage contract, such as the duration of the MCD regulated mortgage contract and the total amount of credit, the firm must, where possible, use those components.

6.16

R

If an MCD regulated mortgage contract provides for different ways of drawdown with different charges or borrowing rates and the MCD mortgage lender uses the assumptions set out in MCOB 10A.3.1 R, the firm must indicate that other drawdown mechanisms for this type of MCD mortgage lender may result in a higher APRC.

6.17

R

Where the firm uses the conditions for drawdown for calculating the APRC, the firm must highlight the charges associated with other drawdown mechanisms that are not necessarily the ones used in calculating the APRC.

6.18

R

(1)

Where a fee is payable for registration of the MCD regulated mortgage contract or comparable security, the firm must disclose that in section 3 with the amount, where known, or where this is not possible the basis for determining the amount.

(2)

Where the fees in (1) are known and included in the APRC, the firm must list the existence and amount of the fee under ‘Costs to be paid on a one-off basis’.

(3)

Where the fees in (1) are not known to the firm and, therefore, not included in the APRC, the firm must clearly indicate the existence of the fee in the list of costs which are not known to the lender.

(4)

The firm must use the standardised wording in section 4 of MCOB 5A Annex 1 R under the appropriate heading.

7

Section ‘5. Frequency and number of payments’

7.1

R

Where a consumer will be required to make payments under an MCD regulated mortgage contract on a regular basis, the firm must indicate the frequency of those payments (eg, monthly).

7.2

R

Where a consumer will be required to make payments under an MCD regulated mortgage contract on an irregular basis, the firm must clearly explain this to the consumer.

7.3

R

The firm must indicate the number of payments under the MCD regulated mortgage contract that the consumer will be required to make over the entire duration of the MCD regulated mortgage contract.

8

Section ‘6. Amount of each instalment’

8.1

R

The firm must clearly indicate the currency of the MCD regulated mortgage contract and the currency and amount of the instalments.

8.2

R

Where the amount of the instalments may change during the life of the MCD regulated mortgage contract, the firm must specify the period during which that initial instalment amount will remain unchanged and when and how frequently afterwards it will change.

8.3

R

Where all or part of the MCD regulated mortgage contract is an interest-only MCD regulated mortgage contract, the firm must insert a statement clearly indicating that fact, prominently at the end of section 6 using the wording in section 6 of MCOB 5A Annex 1 R.

8.4

R

If there is a requirement for the consumer to take out a tied savings product as a condition for being granted an interest-only MCD regulated mortgage contract, the firm must provide the amount and frequency of any payments for this product.

8.5

R

(1)

Where the borrowing rate is variable, the firm must include a statement indicating that fact, using the wording in section 6 of MCOB 5A Annex 1 R and an illustration of a maximum instalment amount.

(2)

Where there is a cap, the illustration under (1) must show the amount of the instalments if the borrowing rate rises to the level of the cap.

(3)

Where there is no cap, the illustration under (1) must illustrate the level of instalments at the highest borrowing rate in the last 20 years, or where the underlying data for the calculation of the borrowing rate is available for a period of less than 20 years, the longest period for which such data is available, based on:

(a)

the highest value of any external reference rate used in calculating the borrowing rate, where applicable,

(b)

or the highest value of a benchmark rate specified by:

(i) the FCA in MCOB 5A Annex 2, 6.8R to 6.10G;

(ii) another competent authority; or

(iii) the European Banking Authority

where the MCD mortgage lender does not use an external reference rate.

(4)

The requirement under (1) does not apply to an MCD regulated mortgage contract where the borrowing rate is fixed for a material initial period of several years and may then be fixed for a further period following negotiation between the MCD mortgage lender and the consumer.

(5)

Where the credit secured by an MCD regulated mortgage contract is a multi-part credit (eg, concurrently part fixed rate, part variable rate), the firm must provide the information about the borrowing rate required by MCOB 5A Annex 2, 8 for each part of the credit and for the overall credit.

8.6

R

(1)

Where the currency of the MCD regulated mortgage contract is different from the consumer's national currency or where the MCD regulated mortgage contract is indexed to a currency which is different from the consumer's national currency, the firm must include a numerical example clearly showing how changes to the relevant exchange rate may affect the amount of the instalments using the wording in section 6 of MCOB 5A Annex 1 R.

(2)

The firm must base the example under (1) on a 20 % reduction in the value of the consumer's national currency.

(3)

The firm must accompany the example under (1) with a prominent statement that the instalments could increase by more than the amount assumed in that example.

(4)

Where there is a cap which limits the increase in (1) to less than 20 %, the firm must state the maximum value of the payments in the consumer's currency instead and omit the statement in (3) on the possibility of further increases.

8.7

R

Where the MCD regulated mortgage contract is fully or partly a variable rate MCD regulated mortgage contract and MCOB 5A Annex 2, 8.3R applies, the firm must give the illustration under MCOB 5A Annex 2, 8.6R(1) on the basis of the instalment amount indicated under MCOB 5A Annex 2, 8.1R.

8.8

R

(1)

Where the currency used for the payment of instalments is different from the currency of the MCD regulated mortgage contract or where the amount of each instalment expressed in the consumer's national currency depends on the corresponding amount in a different currency, the firm must in section 6 indicate the date at which the applicable exchange rate is calculated and either the exchange rate or the basis on which it will be calculated and the frequency of their adjustment.

(2)

Where applicable, the firm must include in its indication under (1) the name of the institution publishing the exchange rate.

8.9

R

Where the MCD regulated mortgage contract is a deferred-interest MCD regulated mortgage contract under which interest due is not fully repaid by the instalments and is added to the total amount of the MCD regulated mortgage contract outstanding, the firm must include an explanation of how and when deferred interest is added to the MCD regulated mortgage contract as a cash amount, and what the implications are for the consumer in terms of his remaining debt.

9

Section ‘7. Illustrative repayment table’

9.1

R

(1)

The firm must include section 7 where the MCD regulated mortgage contract is a deferred-interest MCD regulated mortgage contract under which interest due is not fully repaid by the instalments and is added to the total amount of MCD regulated mortgage contract outstanding, or where the borrowing rate is fixed for the duration of the MCD regulated mortgage contract.

(2)

The firm may replace the word “reimbursed” with “repaid” (shown in round brackets), ie “the amount of the loan that remains to be repaid after each instalment”.

9.2

R

Where the consumer has the right to receive a revised amortisation table, the firm must indicate this along with the conditions under which the consumer has that right.

9.3

R

The firm must include in section 7 an illustrative amortisation table including the following columns:

(1)

‘repayment schedule’ (eg, month 1, month 2, month 3);

(2)

‘amount of the instalment’;

(3)

‘interest to be paid per instalment’;

(4)

’other costs included in the instalment’ (where relevant);

(5)

‘capital repaid per instalment’; and

(6)

‘outstanding capital after each instalment’.

9.4

R

The firm must:

(1)

for the first repayment year, provide an illustrative amortisation table in accordance with MCOB 5A Annex 2, 9.3R for each instalment and include a subtotal for each of the columns at the end of that first year;

(2)

for the following years, provide an illustrative amortisation table in accordance with MCOB 5A Annex 2, 9.3R on an annual basis;

(3)

add an overall total at the end of the table and provide the total amounts for each column; and

(4)

clearly highlight the total cost of the MCD regulated mortgage contract paid by the consumer (ie, the overall sum of the ‘amount of the instalment’ column) and present it as such.

9.5

G

Where the borrowing rate is subject to revision and the amount of the instalment after each revision is unknown, the firm may indicate in the illustrative amortisation table required by MCOB 5A Annex 2, 9.3R the same instalment amount for the whole credit duration.

9.6

R

If the firm acts in accordance with MCOB 5A Annex 2, 9.5G, the firm must:

(1)

draw the fact that the borrowing rate is subject to revision and the amount of the instalment after each revision is unknown to the attention of the consumer by visually differentiating the amounts which are known from the hypothetical ones (eg, using a different font, borders or shading); and

(2)

in a clearly legible text explain for which periods the amounts represented in the table may vary and why.

10

Section ‘8. Additional obligations’

10.1

R

(1)

The firm must specify in section 8 any obligations imposed on the consumer in order to benefit from the MCD regulated mortgage contract, such as the obligation to insure the property, to purchase life insurance, to have a salary paid into an account with the MCD mortgage lender or to buy any other product or service.

(2)

For each obligation specified under (1), the firm must specify:

(a)

towards whom and by when the obligation needs to be fulfilled;

(b)

the duration of the obligation, eg, until the end of the MCD regulated mortgage contract;

(c)

any costs to be paid by the consumer which are not included in the APRC.

10.2

R

(1)

The firm must state whether it is compulsory for the consumer to purchase any ancillary services to obtain the MCD regulated mortgage contract on the stated terms and, if so, whether the consumer is obliged to purchase them from the MCD mortgage lender's preferred supplier or whether they may be purchased from a provider chosen by the consumer.

(2)

Where the possibility referred to in (1) is conditional on the ancillary services meeting certain minimum characteristics, the firm must describe those characteristics in section 8.

(3)

Where applicable, the firm must state the possible consequences of terminating the ancillary services.

10.3

R

Where the MCD regulated mortgage contract is bundled with other products the firm must clearly state:

(1)

the key features of those other products; and

(2)

whether the consumer has a right to terminate the MCD regulated mortgage contract or the bundled products separately and the conditions for and implications of doing so.

11

Section ‘9. Early repayment’

11.1

R

The firm must indicate under what conditions the consumer can repay the MCD regulated mortgage contract early, either fully or partially.

11.2

R

(1)

In the section on early repayment charges, the firm must draw the consumer's attention to any early repayment charge or other costs payable on early repayment in order to compensate the MCD mortgage lender and, where possible, indicate their amount.

(2)

In cases where the amount of compensation would depend on different factors, such as the amount repaid or the prevailing interest rate at the moment of the early repayment, the firm must indicate how the compensation will be calculated and provide the maximum amount that the charge might be, or where this is not possible, an illustrative example in order to demonstrate to the consumer the level of compensation under different possible scenarios.

(3)

The firm may make the following changes to the wording in this section:

(a)

replace the word “possibility” with “right” (shown in round brackets) ie, “You have the right to repay this loan early, either fully or partially”;

(b)

replace the words “Exit charge” and “exit charge” with “Early repayment charge” or “early repayment charge” ” (shown in round brackets).

12

Section ‘10. Flexible features’

12.1

R

(1)

Where applicable, the firm must explain the right to, and conditions for, transferring the MCD regulated mortgage contract to another MCD mortgage lender or property.

(2)

The firm may replace “possibility to” with the “the right to” (shown in round brackets).

12.2

R

Where the product contains any of the features listed in MCOB 5A Annex 2, 12.6R, the firm must list those features as additional features in section 10 and provide a brief explanation of:

(1)

the circumstances in which the consumer can use the feature;

(2)

any conditions attached to the feature;

(3)

if the feature being part of the credit secured by an MCD regulated mortgage contract or comparable security means that the consumer loses any statutory or other protections usually associated with the feature; and

(4)

the firm providing the feature (if not the MCD mortgage lender).

12.3

R

If the feature listed in accordance with MCOB 5A Annex 2, 12.2R contains any additional credit, then the firm must, in section 10, state:

(1)

the total amount of credit (including the credit secured by the MCD regulated mortgage contract or comparable security);

(2)

whether the additional credit is secured or not;

(3)

the relevant borrowing rates; and

(4)

whether the additional credit is regulated or not.

12.4

R

The firm must either include any additional credit amount in the original creditworthiness assessment or, if it is not, the firm must, in section 10, make clear that the availability of the additional amount is dependent on a further assessment of the consumer's ability to repay.

12.5

R

If the feature listed in accordance with MCOB 5A Annex 2, 12.2R involves a savings vehicle, the firm must explain the relevant interest rate.

12.6

R

The possible additional features are:

(1)

‘Overpayments/Underpayments’ (paying more or less than the instalment ordinarily required by the amortisation structure);

(2)

‘Payment holidays’ (periods where the consumer is not required to make payments);

(3)

‘Borrow back’ (ability for the consumer to borrow again funds already drawn down and repaid);

(4)

‘Additional borrowing available without further approval’;

(5)

‘Additional secured or unsecured borrowing’ (completed in accordance with MCOB 5A Annex 2, 12.3R);

(6)

‘Credit card’;

(7)

‘Linked current account’; and

(8)

‘Linked savings account’.

12.7

G

The firm may include any other features offered by the MCD mortgage lender as part of the MCD regulated mortgage contract not mentioned in previous sections.

13

Section ‘11. Other rights of the borrower’

13.1

R

The firm must clearly specify the consumer's reflection period.

13.2

R

Where applicable, the firm must clearly state any other rights of the consumer (other than the reflection period), such as portability (including subrogation) that exist and for each right specify:

(1)

the conditions to which that right is subject;

(2)

the procedure that the consumer will need to follow in order to exercise that right, including payment of any fees;

13.3

R

Where the firm offers the MCD regulated mortgage contract at a distance, the firm must inform the consumer of the absence of a right of withdrawal.

14

Section ‘12. Complaints’

14.1

R

(1)

The firm must, in section 12, indicate to whom within the firm, the consumer can make a complaint and provide:

(a)

the name of the relevant department;

(b)

contact details, such as a geographical address, telephone number or contact person (including in the case of the contact person, their contact details); and

(c)

a link to the complaints procedure on the relevant page of the firm's website or similar information source.

(2)

The information required by (1) is in respect of the firm providing the ESIS.

14.2

R

The firm must, in section 12, indicate:

(1)

the name of the Financial Ombudsman Service; and

(2)

that using the firm's internal complaint procedure is a precondition for access to the Financial Ombudsman Service, using the wording in section 12 of MCOB 5A Annex 1 R.

14.3

R

In the case of an MCD regulated mortgage contract with a consumer who is resident in another EEA State, the firm must refer to the existence of FIN-NET (http://ec.europa.eu/internal_market/fin-net/)

15

Section ‘13. Non-compliance with the commitments linked to the MCD regulated mortgage contract: consequences for the borrower’

15.1

R

(1)

The firm must in section 13, describe the different main cases (eg, late payments/ default, failure to respect the obligations set out in Section 8 ‘Additional obligations’) where non-observance of any of the consumer's obligations linked to the MCD regulated mortgage contract may have financial or legal consequences for the consumer and indicate where the consumer can obtain further information.

(2)

The description required by (1) must be a summary which can be read and understood on its own.

(3)

For each of the cases described under (1), the firm shall specify, in clear, easy comprehensible terms, the sanctions or consequences to which they may give rise and highlight any serious consequences.

15.2

G

The disclosure required by MCOB 5A Annex 2, 15.1R(1) relates to “main cases”, rather than every case.

15.3

G

The firm may provide the detail relating to the summary provided under MCOB 5A Annex 2, 15.1R(2) separately in the terms and conditions of the MCD regulated mortgage contract.

15.4

R

Where the land used to secure the MCD regulated mortgage contract may be returned or transferred to the MCD mortgage lender, if the consumer does not comply with the obligations, the firm must, in section 13, include a statement indicating that fact, using the wording in section 13 of MCOB 5A Annex 1 R.

16

Section ‘14. Additional information’

16.1

R

If the firm is carrying on distance marketing, it must, in section 14 of MCOB 5A Annex 1 R, state the law applicable to the MCD regulated mortgage contract or the competent court.

16.2

R

Where the MCD mortgage lender intends to communicate with the consumer during the life of the MCD regulated mortgage contract in a language different from the language of the ESIS, the firm must include that fact and state the language that will be used.

16.3

R

The firm must state the consumer's right to be provided with a copy of the draft MCD regulated mortgage contract when the MCD mortgage lender provides the consumer with a binding offer.

17

Section ‘15. Supervisor’

17.1

The firm must state the relevant authority or authorities for the supervision of the pre-contractual stage of the MCD regulated mortgage contract.