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FCA creates two MCD-linked lifetime mortgage definitions

  • 01/04/2015
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FCA creates two MCD-linked lifetime mortgage definitions
Lifetime mortgages have been given a Mortgage Credit Directive exempt status by the Financial Conduct Authority (FCA) following the results of its consultation.

Initially the FCA had proposed to proceed with one new definition of a lifetime mortgage to reflect MCD rules, but found that this would exclude products that required capital repayments during the term.

The FCA explained proceeding with a single definition could potentially harm consumers, as individuals would be unlikely to receive the standard of advice the FCA expected for lifetime mortgages.

As such, the regulator has introduced two statuses for lifetime mortgages – one covered by the Mortgage Credit Directive with capital repayments and one exempt without.

Lifetime mortgages, covered by the MCD, will need to be offered alongside a European Standardised Information Sheet (ESIS).

The MCD-exempt lifetime mortgage, will require a key facts illustration (KFI), whereby enhanced advice and an additional qualification is also needed.

Lifetime mortgages falling under the MCD’s definition will be required to provide additional disclosure to customers on the risks of the product alongside the ESIS, the FCA said.

Lifetime mortgage providers will be required to comply with the new rules from 21 March 2016.


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