This section of the Guide explains the rules on responsible lending in chapter 11 of MCOB (MCOB 11). These rules oblige lenders to lend responsibly. They do not apply to mortgage intermediaries. However, you will find it useful to understand the rules because:
When making a mortgage offer, or agreeing a further advance, a lender must be able to show that it took account of the consumer's ability to repay (MCOB 11.3.1 R). This rule reflects the Principle 6 requirement to pay due regard to the interests of consumers, and to treat them fairly (see section 3.2 of Part I).
The rules do not prescribe the steps a lender must take when assessing ability to repay. We recognise that sometimes a lender may rely on self-certification by the consumer. However, the lender will have to decide in what circumstances this is appropriate. In doing this, the lender will need to consider both the interests of the consumer and the reliance they can place on the information provided (MCOB 11.3.2 R).
The rules assume, unless there is evidence to the contrary, that regular mortgage payments will come from income. So, knowledge of income is generally expected to underpin the responsible lending decision (MCOB 11.3.5 G). Similarly, the lender will need to consider ability to repay from means other than income, where the consumer has said this is the case (MCOB 11.3.7 G).
A lender may choose to draw on many sources for information on which to base a responsible lending decision. You may well be one of these, especially where the consumer is acting on a recommendation you made. This is because you will have considered affordability when recommending a mortgage.