Mortgages and home finance

You're reading this because you want to find out more about advertising qualifying credit.

If you're not sure what we mean by qualifying credit, please see our Glossary. On these pages, we use the word 'mortgage' to mean all types of qualifying credit.

• We began regulating mortgages, including mortgage advertising, in October 2004. So most firms should be familiar with the regime now.
• We monitor advertising in all media, and contact firms if we see any problems. If we need to, we take action. We also deal with complaints about adverts.
• There are more adverts for mortgages than for many other financial services. Adverts appear in a range of media, including TV and the regional press, as well as all the national daily tabloids. So mortgage advertising has a big impact on consumers.
• We know consumers use adverts to shop around. So they must be given clear, fair and not misleading information, which is also balanced. We'll look at these points in more detail later in these pages.
• There also needs to be fairness between firms: less-scrupulous firms should not gain an unfair advantage through misleading advertising.

1. When do I need to give a risk warning?

You need a prominent risk warning for all mortgage adverts except:

• where they are exempt; and
• if you advertise on TV or radio and the main purpose of the programme the advert appears in is not to promote lending.

What wording should I use?

For adverts for mortgages (other than lifetime mortgages and mortgages for debt consolidation) you must use:	Your home may be repossessed if you do not keep up repayments on your mortgage.
If you are also advertising unsecured credit you can use:	Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
If you are advertising debt consolidation you must use:	Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
If you are also advertising unsecured credit you can use:	Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
For lifetime mortgages you must use:	This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

 

You can find more details on risk warnings in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.13R.

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2. When do I need to state the Annual Percentage Rate (APR)?

You need to state an APR prominently for adverts that include 'sub-prime' lending, or where you give price information about a specific product – we look at all this in more detail below.

Sub-prime lending

You must state an APR if your advert is designed to interest customers who might consider themselves in the 'sub-prime' market (or, generally, might think their access to credit is restricted).

In this context, examples of adverts that refer to such customers include those that mention:

1. credit history;
2. credit rating;
3. county court judgments;
4. employment; or
5. housing circumstances (for example, council tenants);

or those that contain wording such as 'all circumstances considered' or 'whatever your background or situation' (this is not a complete list).

Price information

You must state an APR if your advert gives price information about a specific product, or about a specific range of products.

Price information is a broad term. It includes reference to any payment that a customer may have to make, either to get a mortgage or under a mortgage that has already started. This includes references to rates of charge, so it includes the interest rate(s) of the mortgage itself.

Price information also includes references to the customer not having to make payments or not incurring a rate of charge. It also includes any monetary amount (for example, the mortgage amount or how much the customer could save).

But price information does not include fees for advising on or arranging an FSA-regulated mortgage contract i.e. your broker fees.

You can find more details on the APR in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.17R to 3.6.25R.

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3. How should I state the APR?

You must state the APR to one decimal place, using the phrase: ‘The overall cost for comparison is X.x% APR'.

You can find more details in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.17R.

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4. How do I calculate a representative Annual Percentage Rate (APR)?

If the APR varies (for example, depending on the customer's circumstances) then the APR you state must represent the business you expect to come from your advert.

A representative APR is an APR at or below which at least 66% of customers responding to your advert and taking out a mortgage would be charged.

• If you’ve advertised before for similar mortgages:

  • in calculating a representative APR you should take account of past business arising from advertising similar mortgages; and

  • the business should cover the past 12 months if possible.
    One way to think about a representative APR is to list the APRs your customers have paid over the past 12 months. The representative APR you state in your advert should not be less than the APR paid by at least two-thirds of the customers on the list.

• If you haven’t advertised before for similar mortgages, the same principle still applies. The only difference is that you should take account of expected rather than past business.

You can find more details in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.22R, 3.6.23R and 3.6.24G.

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5. When should I state information about my broker fees?

If you are allowed to charge a fee, you must give a prominent indication of:

• the amount of the fee, if you know it (e.g. £250 or 3% of the mortgage amount); or
• a representative fee, based on the business you expect to get from the advert (you should do this if your fee varies and also indicate the representative nature of the fee).

Just putting a fee range is not enough to comply with this rule.

If you advertise yourself or hold yourself out as independent, you have to give the consumer the option to pay by fee. So, if you claim to be independent you must state your fee in the way set out above. See also Question 6 about 'What do you mean by independent'.

You can find more details on broker fees in our Handbook – Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.27R to 3.6.30G.

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6. What do you mean by 'independent'?

You must not hold yourself out (including advertising your firm) as acting independently in providing information or advice to customers unless you intend to:

• provide your service wholly or predominantly based on the whole market; and
• give the customer the choice of paying by fee for that service.

So if you advertise your firm as independent you must state your fee prominently. See also Question 5 about 'Stating information about your Fees'.

You can find more details on independence in our Handbook - Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 4.3.7R.

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7. What do you mean by 'prominent'?

There are a number of rules in our Handbook that relate to '‘prominence'.

In our Mortgages and Home Finance Conduct of Business Sourcebook, we give guidance on how we assess prominence. You can find this in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.14G (1).

As the guidance explains, we do not consider prominence simply on the basis of font size. We will assess it in relation to the advert as a whole – so you need to consider carefully how you position any required text or risk warning, as well as other matters such as the background, colour and size of text, and its surroundings.

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8. What about advertising in directories and other long-life publications?

Firms use advertising opportunities in directories and other publications and we do not want to stifle this type of promotional activity.

You must take reasonable steps to ensure your adverts are clear, fair and not misleading. In a long-life advertisement, for example, an APR that is correct at the date of original publication may become misleading if it later goes out of date. We consulted on this issue and we now allow firms to quote APRs in long-life publications if they are accompanied by a prominent statement that the information can become outdated.

You can find more details in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.5G (2).

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9. Do I need to state that I am authorised and regulated by the Financial Services Authority?

No. You do not have to name the FSA as your regulator.

But if you choose to name us as your regulator and your advert also refers to products or services we do not regulate, then you should make clear that those non-regulated products or services are not regulated by the FSA. Otherwise your advert may not be clear, fair and not misleading.

For example, some firms advertise both regulated mortgage contracts and other types of mortgage or personal loans. In such a case, your advert should make clear that we do not regulate the other types of mortgage or personal loans. You could say, if appropriate, that the product or service is regulated by another regulator (and name that regulator) or say that it is not regulated.

You can find more details in our Mortgages and Home Finance Conduct of Business Sourcebook, Chapter 3 at 3.6.2G (3).

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