Last updated: 12 December 2016
At a glance
- The new rules are now fully embedded in lenders' processes and practices on new lending. More information on the (MMR) can be found on the FCA website.
- Among the changes which were introduced was the introduction of an obligation on lenders to make sure that borrowers could afford to service and repay the loan they were taking out
- Another aspect of the new rules that remain of particular interest are those affecting existing borrowers who may be caught by the tighter rules now in place on new borrowing.
- Lenders are required to ensure that they do not treat "trapped" borrowers (MCOB 11.8) who are unable to borrow on a new mortgage any less favourably than they would treat other customers with similar characteristics.
- Lenders are allowed - but not required - to apply transitional provisions (MCOB 11.7) when lending to borrowers who already had mortgages before the new MCOB rules came in.
- Essentially, these allow lenders to "switch off" some elements of the new affordability requirements as long as the borrower does not increase the size of their loan, and the change would be in the borrower's best interests.
- On 16 May 2016, the FCA published the findings of its Responsible Lending Review into mortgage lending decisions.
Why this matters for lenders
The MMR was the biggest set of reforms to regulation since residential mortgages became subject to statutory regulation in 2004. The ramifications will continue to be felt for some time to come, and we need to keep under review the various effects on the market.
The CML undertook a significant amount of work with members to influence the final form of the rules with the FCA, and to refine understanding among members of the FCA's intentions.
Since the MMR came into force, the FCA has expressed concern about the operation of the transitional provisions, for example in this speech by FCA director of mortgage and consumer lending Linda Woodall at the CML's annual conference in November 2014.
This is one aspect of the MMR that remains significant in terms of the need for continuous review of current practices. Notably, lenders are allowed to disregard some of the normal requirements when lending on an