What we do

 

This project focused on issues surrounding responsible lending and aimed to gain an understanding of good and poor practice in the regulated mortgage industry. 

It included an assessment of whether there are effective safeguards to ensure customers take out mortgages they can afford and are within their financial capability.

18 firms which were actively lending on mortgages were visited between November 2007 and April 2008. The files reviewed related to mortgages that completed in June 2007.

Key findings:

  • overall, the firms could have been more cautious in their approach to lending
  • more stringent checks could have been applied to ensure customers had the ability to pay over the life of the term
  • in determining affordability, more emphasis could have been put on checking customers' general expenditure as well as expenditure on credit.

To assist firms improve their affordability assessments we have outlined some real examples of good and poor practice we found from the firms we visited. 

These examples below are from firms' written lending policies (including the responsible lending policy as required in MCOB) followed by what we saw in practice from customer files.

Good practice shows firms operating at, and going beyond, our minimum requirements and poor practice shows firms falling below them.