Mortgage advice process and client interaction (fact-finding, affordability, suitability)
Domain 1 - Mortgage advice process and client interaction
This domain tests whether you can take a client from first contact to a documented, suitable recommendation: gathering a full fact-find, testing affordability the way MCOB 11.6 requires, and showing why the chosen product beats the alternatives.
The fact-find is evidence, not conversation
Capture: client and any joint borrower's identity and residency; needs and objectives (buy, remortgage, raise capital, consolidate debt, move to interest-only, retire); personal circumstances and dependants; employment status and income components (basic, guaranteed overtime or bonus, commission); committed expenditure (secured and unsecured credit, childcare, school fees, ground rent); basic essential expenditure (utilities, food, transport, insurance); assets and deposit source; existing property and mortgages; future plans (retirement date, further borrowing, starting a family); health and protection needs; vulnerability indicators. Self-employed income needs the correct trading period and the lender's chosen measure (net profit, salary plus dividends, or accountant's certificate).
Affordability under MCOB 11.6
You cannot enter a regulated mortgage contract unless affordability has been assessed. Consider net income, committed expenditure, basic essential expenditure and credit commitments, and the effect of likely future changes: retirement during the term, a rise in interest rates, the end of a fixed rate, and the repayment vehicle for interest-only. The FPC's 3% interest-rate stress test was withdrawn in 2022, so lenders apply their own stress rates - but the affordability obligation itself is unchanged.
Suitability and disclosure
Under MCOB 4.4, disclose the scope of service (whole of market, restricted, or single lender), whether you advise on protection, and your fee basis. The ESIS replaced the KFI in 2016 and is the pre-application disclosure; an offer document follows under MCOB 6. The suitability rationale must link needs, circumstances, affordability, risk and product features, and record why rejected alternatives were rejected.
Worked example
A 52-year-old borrower earning £48,000 wants a £230,000 interest-only mortgage to run to age 72 with no repayment vehicle. The outgoings look affordable on paper, but the term runs past state pension age, there is no credible repayment strategy, and the lender's stress rate at age 72 fails. The suitable outcome is a shorter term, a repayment or part-and-part structure, or a smaller loan - not a stretched interest-only sale. Document the reasoning.
Traps
Treating a low LTV as proof of affordability; accepting declared expenditure without bank statements; ignoring retirement age; failing to evidence the deposit; recommending before the fact-find is complete; and leaving no written suitability rationale.