Related provisions for ICOBS 6A.2.2
Description of interest rate types and rates of interest. This table belongs to MCOB 9.4.26R:
Description of the interest rate 
Amount payable in each instalment (if applicable) 
Lender's base mortgage rate  must be described as the [Lender]'s standard variable rate, currently X%, [where applicable insert the date at which the interest rate ends or period for which the interest rate applies]. 
Amount based on X%. 
Fixed rate  must be described as fixed rate of X% [where applicable insert the date at which the interest rate ends or the period for which the interest rate applies]. 
Amount based on the fixed rate of X%. 
Discounted rate  must be described as a variable rate, currently X%, with a discount of Y% [where applicable insert the date at which the discount ends or the period for which the discount applies], giving a current rate payable of Z%. 
Amount based on Z%. 
Capped rate  must be described as a variable rate, currently X%, which will not go above a ceiling of Y% [where applicable insert the date at which the capped interest rate ends or the period for which the capped interest rate applies]. 
Amount based on the current interest rate payable (X%). 
Capped and collared  must be described as a variable rate, currently X%, which will not go below a floor of Y% or above a ceiling of Z% [where applicable insert the date at which the capped and collared interest rate ends or the period for which the capped and collared interest rate applies]. 
Amount based on the current interest rate payable (X%). 
Tracker rate  must be described as a variable rate which is [X% above/X% below/the same as] [insert interest rate tracked, currently Z%], [where applicable insert the date at which the interest rate ends or the period for which the interest rate applies], to give a current rate payable of Y%. Details should also be provided of how soon after an interest rate change the mortgage interest rate is adjusted. 
Amount based on Y%. 
Deferred rate  must be described as a variable rate, currently X%, where Y% is not paid now but is added to your mortgage [where applicable insert the date at which the deferred interest rate ends or the period for which the deferred interest rate applies], to give a current rate payable of Z%. 
Amount based on Z%. 
Stepped rate where different interest rates apply over different time periods (for example, fixed interest rate in year 1 changes in year 2). Each element should be dealt with individually as above. 
Amount for each of the 'steps'. 
Combinations of the above must be treated in the same way as the descriptions above, (for example, if a discounted interest rate has a 'floor' then it must be described as such). 
Follow the above treatment depending on the combination. 
Description of interest rate types and rates of interest. This table belongs to MCOB 5.6.26R:
Description of the interest rate 
Amount payable in each instalment 
Lender's base mortgage rate  must be described as the [Lender]'s standard variable rate, currently X%, [where applicable insert the date at which the interest rate ends or period for which the interest rate applies]. 
Amount based on X%. 
Fixed rate  must be described as a fixed rate of X% [where applicable insert the date at which the interest rate ends or the period for which the interest rate applies]. 
Amount based on the fixed rate of X%. 
Discounted rate  must be described as a variable rate, currently X%, with a discount of Y% [where applicable insert the date at which the discount ends or the period for which the discount applies], giving a current rate payable of Z%. 
Amount based on Z%. 
Capped rate  must be described as a variable rate, currently X%, which will not go above a ceiling of Y% [where applicable insert the date at which the capped interest rate ends or the period for which the capped interest rate applies]. 
Amount based on the current interest rate payable (X%). 
Capped and collared  must be described as a variable rate, currently X%, which will not go below a floor of Y%, or above a ceiling of Z% [where applicable insert the date at which the capped and collared interest rate ends or the period for which the capped and collared interest rate applies]. 
Amount based on the current interest rate payable (X%). 
Tracker rate  must be described as a variable rate which is [X% above/X% below/the same as] [insert interest rate tracked, currently Z%,] [where applicable insert the date at which the rate ends or the period for which the interest rate applies], to give a current rate payable of Y%. Details should also be provided of how soon after an interest rate change the mortgage interest rate is adjusted. 
Amount based on Y%. 
Deferred rate  must be described as a variable rate, currently X%, where Y% is not paid now but is added to your mortgage [where applicable insert the date at which the deferred interest rate ends or the period for which the deferred interest rate applies], to give a current rate payable of Z%. 
Amount based on Z%. 
Stepped rate where different interest rates apply over different time periods (for example, fixed interest rate in year 1 changes in year 2). Each element should be dealt with individually as above. 
Amount for each of the 'steps'. 
Combinations of the above must be treated in the same way as the descriptions above, (for example, if a discounted interest rate has a 'floor' then it must be described as such). 
Follow the above treatment depending on the combination. 
An example of how the information required by MCOB 5.6.52 R (1), MCOB 5.6.52 R (3) and MCOB 5.6.52 R (5) may be presented is as follows:
Cost of repaying the capitalYou will still owe £Z at the end of the mortgage term. You will need to make separate arrangements to repay this. When comparing the payments on this mortgage with a repayment mortgage, remember to add any money that you may need to pay into a separate savings plan to build up a lump sum to repay this amount. 

Savings plan that you do not have to take out through [insert name of mortgage lender or mortgage intermediary] 
Monthly payments 
XYZ savings plan (see separate product disclosure document) 
£C 
What you will need to pay each month including the cost of a savings plan to repay the capital 

36 payments at a fixed rate currently x% followed by: 
£(A+C) 
264 payments at a variable rate currently y%. 
£(B+C) 
12Table of examples of typical redress calculations
Example 1 
Capital shortfall and higher endowment outgoings 
Example 2 
Capital shortfall partially offset by lower endowment mortgage outgoings 
Example 3 
Capital shortfall more than offset by lower endowment mortgage outgoings 
Example 4 
Capital surplus more than offset by higher endowment mortgage outgoings 
Example 5 
Capital surplus partially offset by higher endowment mortgage outgoings 
Example 6 
Capital surplus and lower endowment mortgage outgoings 
Example 7 
Low start endowment mortgage 
Example 1 

Capital shortfall and higher endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 5 years 

Established facts 

Endowment surrender value: 
£3,200 
Capital repaid under equivalent repayment mortgage: 
£4,200 
Surrender value less capital repaid: 
(£1,000) 
Cost of converting from endowment mortgage to repayment mortgage: 
(£200) 
Total outgoings to date 

Equivalent repayment mortgage (capital + interest + DTA life cover): 
£21,950 
Endowment mortgage (endowment premium + interest): 
£22,250 
Difference in outgoings (repayment  endowment): 
(£300) 
Basis of compensation 

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid and also because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. The two losses and the conversion cost are therefore added together in order to calculate the redress. 

Redress 

Loss from surrender value less capital repaid: 
(£1,000) 
Loss from total extra outgoings under endowment mortgage: 
(£300) 
Cost of converting to repayment mortgage: 
(£200) 
Total loss: 
(£1,500) 
Therefore total redress is: 
£1,500 
Example 2 

Capital shortfall partially offset by lower endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 5 years 

Established facts 

Endowment surrender value: 
£2,500 
Capital repaid under equivalent repayment mortgage 
£4,200 
Surrender value less capital repaid under equivalent repayment mortgage: 
(£1,700) 
Cost of converting from endowment mortgage to repayment mortgage 
(£300) 
Total outgoings to date: 

Repayment mortgage (capital + interest + DTA life cover): 
£21,950 
Endowment mortgage (endowment premium + interest): 
£21,350 
Difference in outgoings (repayment  endowment): 
£600 
Basis of Compensation 

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained form the lower outgoings of the endowment mortgage to date. In calculating the redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. 

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£1,700) 
Gain from total lower outgoings under endowment mortgage: 
£600 
Cost of converting to repayment mortgage: 
(£300) 
Net loss: 
(£1,400) 
Therefore total redress is: 
£1,400 
Redress if it is unreasonable to take account of gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£1,700) 
Gain from total lower outgoings under endowment mortgage: 
Ignored* 
Cost of converting to repayment mortgage: 
(£300) 
Net loss taken into account: 
(£2,000) 
Therefore total redress is: 
£2,000 
* In this example, and also in Examples 3, 7, 8 and 9, the complainant's circumstances are assumed to be such as to make it unreasonable to take account of any of the gain from lower outgoings. 
Example 3 

Capital shortfall more than offset by lower endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 8 years 

Established facts 

Endowment surrender value: 
£7,300 
Capital repaid under equivalent repayment mortgage: 
£7,600 
Surrender value less capital repaid: 
(£300) 
Cost of converting from endowment mortgage to repayment mortgage: 
(£200) 
Total outgoings to date: 

Repayment mortgage (capital + interest + DTA life cover): 
£34,510 
Endowment mortgage (endowment premium + interest): 
£33,990 
Difference in outgoings (repayment  endowment): 
£520 
Basis of Compensation 

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained from the lower total outgoings of the endowment mortgage. In calculating redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. 

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£300) 
Gain from total lower outgoings under endowment mortgage: 
£520 
Cost of converting to repayment mortgage: 
(£200) 
Net gain: 
£20 
Therefore, there has been no loss and no redress is payable. 

Redress if it is unreasonable to take account of gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£300) 
Gain from total lower outgoings under endowment mortgage: 
Ignored 
Cost of converting to repayment mortgage: 
(£200) 
Net loss taken into account: 
(£500) 
Therefore total redress is: 
£500 
Example 4 

Capital surplus more than offset by higher endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 8 years 

Established facts 

Endowment surrender value: 
£7,800 
Capital repaid under equivalent repayment mortgage: 
£7,600 
Surrender value less capital repaid: 
£200 
Cost of converting from endowment mortgage to repayment mortgage: 
(£250) 
Total outgoings to date: 

Repayment mortgage (capital + interest + DTA life cover): 
£34,510 
Endowment mortgage (endowment premium + interest): 
£34,950 
Difference in outgoings (repayment  endowment): 
(£440) 
Basis of Compensation 

In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage but has gained because the surrender value of the endowment is greater than the capital repaid. Since the sum of the loss and the conversion cost is greater than the gain, the redress is calculated as the difference between the two. 

Redress 

Gain from surrender value less capital repaid: 
£200 
Loss from total extra outgoings under endowment mortgage: 
(£440) 
Cost of converting to repayment mortgage: 
(£250) 
Net loss: 
(£490) 
Therefore total redress is: 
£490 
Example 5 

Capital surplus partially offset by higher endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 10 years 

Established facts 

Endowment surrender value: 
£11,800 
Capital repaid under equivalent repayment mortgage 
£9,700 
Surrender value less capital repaid: 
£2,100 
Cost of converting from endowment mortgage to repayment mortgage: 
(£300) 
Total outgoings to date: 

Repayment mortgage (capital + interest + DTA life cover): 
£46,800 
Endowment mortgage (endowment premium + interest): 
£47,500 
Difference in outgoings (repayment  endowment): 
(£700) 
Basis of Compensation 

In this example, the complainant has suffered loss because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. However the sum of this and the conversion cost is less than the complainant's gain from the difference between the surrender value of the endowment and the capital repaid. Thus no redress is payable. 

Redress 

Gain from surrender value less capital repaid: 
£2,100 
Loss from total extra outgoings under endowment mortgage: 
(£700) 
Cost of converting to repayment mortgage: 
(£300) 
Net gain: 
£1,100 
Therefore, there has been no loss and no redress is payable. 
Example 6 

Capital surplus and lower endowment mortgage outgoings 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 10 years 

Established facts 

Endowment surrender value: 
£10,100 
Capital repaid under equivalent repayment mortgage 
£9,700 
Surrender value less capital repaid: 
£400 
Cost of converting from endowment mortgage to repayment mortgage: 
(£200) 
Total outgoings to date: 

Repayment mortgage (capital + interest + DTA life cover): 
£46,800 
Endowment mortgage (endowment premium + interest): 
£46,300 
Difference in outgoings (repayment  endowment): 
£500 
Basis of Compensation 

In this example, the complainant has gained both because the surrender value of the endowment is greater than the capital repaid and because of the lower total outgoings of the endowment mortgage. These gains are larger than the cost of converting to a repayment mortgage. Thus no further action is necessary. 

Redress 

As there has been no loss, no redress is payable. 
Example 7 

Low start endowment mortgage 

Background 

Capital sum of £50,000 

25 year endowment policy 

Duration to date: 10 years 

Endowment premium per month: starting at £35 in first year, increasing by 20% simple on each policy anniversary, reaching £70 after five years and then remaining at that level. 

Established facts: 

Endowment surrender value: 
£8,200 
Capital repaid under equivalent repayment mortgage: 
£9,700 
Surrender value less capital repaid: 
(£1,500) 
Cost of converting from endowment mortgage to repayment mortgage: 
(£250) 
Total outgoings to date 

Repayment mortgage (capital + interest + DTA life cover): 
£46,800 
Endowment mortgage (endowment premium + interest): 
£45,640 
Difference in outgoings (repayment minus endowment): 
£1,160 
Of this difference in outgoings, £800 arose in the five year period when the complainant was paying a low endowment premium. 

Basis of compensation 

In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained from the lower total outgoings of the endowment mortgage. As in Example 3, in calculating redress the whole of the gain should be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to do so. However, unlike Example 3, in a low start endowment mortgage the complainant may have chosen to pay a lower than usual premium in the early years (this would need to be established on the facts of the case). Where it has been established that the complainant chose to make lower payments, even if it is unreasonable to take account of the whole of the gain from total outgoings, the gain from paying a lower premium during the low start period is normally taken into account. In such cases the redress is calculated as the capital loss plus the conversion cost minus the total amount by which repayment mortgage outgoings would have exceeded the actual low start endowment mortgage outgoings during the five year low start period. 

Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£1,500) 
Gain from total lower outgoings under endowment mortgage: 
£1,160 
Cost of converting to repayment mortgage: 
(£250) 
Net loss: 
(£590) 
Therefore total redress is: 
£590 
Redress if it is unreasonable to take account of gain from lower outgoings 

Loss from surrender value less capital repaid: 
(£1,500) 
Gain from total lower outgoings during low start period of endowment mortgage: 
£800 
Cost of converting to repayment mortgage: 
(£250) 
Net loss taken into account: 
(£950) 
Therefore total redress is: 
£950 
Table: Examples of factors to take into account when deciding whether old misconduct is sufficiently serious to disclose
Factors to take into account 
Comments 
(A) Whether P has committed a serious breach of individual conduct requirements. 
Individual conduct requirements has the same meaning as in Part Two of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements). Factors to take into account in deciding whether the breach is serious include the following. (1) The extent to which the conduct was deliberate or reckless. (2) The extent to which the conduct was dishonest. (3) Whether the breaches are frequent or whether they have continued over a long period of time. The fact that breaches were frequent or repeated may increase the likelihood that they should be disclosed since the breaches may show a pattern of noncompliance. (4) The extent of loss, or risk of loss, caused to existing, past or potential investors, depositors, policyholders or other counterparties or customers. (5) The reasons for the breach. For example, where the breach was caused by lack of experience which has been remedied by training or further experience, it is less likely that the breach will still be relevant. 
(B) Whether the conduct caused B to breach requirements of the regulatory system or P was concerned in a contravention of such a requirement by B and, in each case, whether P’s conduct was itself serious. 
(1) The factors in (A) are relevant to whether P’s conduct was serious. (2) The seriousness of the breach by B is relevant. The factors in (A) are also relevant to this. (3) A breach by B of certain requirements is always likely to be serious under (2). Breach of the threshold conditions is an example. However that does not mean that P’s involvement will automatically be serious. 
(C) Whether P’s conduct involved dishonesty (whether or not also involving a criminal act). 
Dishonesty is an important factor but it is not automatically decisive in every case. For instance, a small oneoff case of dishonesty many years ago may not be sufficiently serious to require disclosure. 
(D) Whether the conduct would have resulted in B’s dismissing P, had P still been working for B, based on B's disciplinary policies and the requirements of the law about unfair dismissal. 

(E) Whether the conduct was such that, if B was considering P for a role today and became aware of the historical conduct, B would not employ P today notwithstanding the time that has passed. 

Note 1: P refers to the employee about whom the reference is being written. 

Note 2: B refers to the firm giving the reference. 