MCOB After the Mortgage Rule Review: Advice, Execution-Only and Affordability

The FCA rewrote part of its mortgage rulebook in July 2025, and the change has an unusual property: it is permissive. The rules came into force on 22 July 2025 with no implementation period, but because they relax requirements rather than impose them, firms choose when to adopt them. The practical consequence is that two advisers doing the same job at two different lenders may currently be working to different rules, and a training programme written before July 2025 is describing a regime that no longer binds.

What MCOB is

The Mortgages and Home Finance: Conduct of Business sourcebook governs the sale and administration of regulated mortgage contracts, home purchase plans and home reversion plans. It covers advice and selling standards, disclosure, responsible lending, charges, arrears and repossession. It is the rulebook that decides when a conversation with a customer becomes advice — and that is precisely what changed.

The interaction trigger is gone

Under the old rules, the trigger at MCOB 4.8A.7R(3) meant that interactive dialogue with a customer could itself convert a sale into an advised one. Firms managed the risk by scripting tightly and training staff to avoid saying anything that might constitute advice, which produced the odd result that the rule discouraged firms from being helpful.

PS25/11 removed that trigger, along with its associated rules and guidance. Interactive dialogue no longer automatically makes a sale advised.

What replaced it is not nothing. A new rule requires firms to consider procedures for identifying execution-only customers who may need advice or other support, in order to avoid causing foreseeable harm — framed explicitly as part of their Consumer Duty obligations. So a bright-line rule has been replaced by a judgement, and the judgement sits with the person on the call.

That is the most significant training consequence in the whole reform. A scripted process could be taught once; a duty to notice when a customer needs advice has to be taught continuously, and evidenced.

What did not change

Three things survived intact, and firms relaxing their processes should be clear about them.

A positive election is still required. A customer proceeding execution-only after interactive dialogue must still positively elect to do so, confirming they understand they are giving up the suitability protections that come with advice.

Advice remains mandatory for higher-risk transactions, including equity release and debt consolidation. The FCA considered calls to extend mandatory advice to more transaction types and declined, but it did not shorten the list either.

A positive election is not a safe harbour. The FCA states plainly that obtaining one does not by itself guarantee compliance with the new rule or with the Consumer Duty’s consumer understanding outcome. A firm that treats the election as a compliance tick has misread the reform.

The FCA also said it would not issue further guidance on the new rules, which means firms are expected to form and document their own view.

Affordability: two distinct changes

Reducing a mortgage term. The requirement in MCOB 11.6.3R for a full affordability assessment when a customer reduces their term has been removed. Firms must instead assess affordability under the Consumer Duty and PRIN 2A together with their own responsible lending policy. The logic is that shortening a term raises monthly payments but reduces total interest and overall risk, and a full reassessment was deterring a change that usually benefits the customer.

Remortgaging. The Modified Affordability Assessment at MCOB 11.9.5R has been widened. It now covers a new contract with a new lender where that contract is more affordable than either the customer’s current mortgage or a new product their existing lender could offer. Two clarifications matter for anyone operating the test: paragraphs (3)(a) and (b) are cumulative rather than alternatives, and the calculation in (b) must include any product or arrangement fee.

That second point is the kind of detail that produces systematic error if missed. A comparison that omits the arrangement fee will show some remortgages as more affordable than they are.

Arrears: guidance out, rules in

Two pieces of FCA guidance were withdrawn: FG13/7 on interest-only mortgages and FG24/2 on cost-of-living support. In their place the Handbook gained a rule and guidance at MCOB 13.3.8AR and 13.3.8BG, requiring firms to deal fairly with customers whose mortgage term has expired and not to pursue repossession until other reasonable attempts to resolve the position have failed.

Moving an expectation from guidance into a Handbook rule raises its status rather than lowering it. Firms whose arrears procedures cite FG13/7 or FG24/2 need to re-reference them, and any training material built around that guidance is now pointing at withdrawn documents.

A further rule, MCOB 4.1.2ER, applies the changes to Gibraltar-based lenders lending into the UK.

Why competence is the live risk here

Deregulation transfers risk from the rulebook to the individual. Before July 2025, an adviser who followed the script was broadly safe because the trigger was mechanical. Now the firm must identify execution-only customers who may need advice, exercise judgement about foreseeable harm, assess affordability against its own policy rather than a prescribed test, and do all of it in a way it can evidence to a supervisor.

Each of those is a competence requirement in substance, even where the Handbook does not label it as one. The relevant parallel is the FCA’s own finding in a different area — its October 2025 review of client categorisation concluded that firms failed largely because assessments were unstructured and undocumented rather than because staff lacked knowledge. The same failure mode is available here. Our CPD course library covers the conduct, Consumer Duty and record-keeping disciplines this now depends on.

Frequently asked questions

When did the mortgage rule changes take effect?

The instrument came into force on 22 July 2025, with no implementation period. Because the changes are permissive rather than mandatory, firms decide when to adopt them, so the date a particular lender or intermediary actually changed its process will vary.

Can a firm now have a detailed conversation without giving advice?

The automatic trigger has gone, so interactive dialogue no longer converts a sale into an advised one by itself. But the customer must still positively elect to proceed execution-only and confirm they understand they are losing the suitability protections, and the firm must have procedures to identify customers who may need advice.

Is advice still compulsory for anything?

Yes. Advice remains mandatory for higher-risk transactions including equity release and debt consolidation. The FCA declined to extend the list and did not reduce it.

Does reducing a mortgage term still require a full affordability assessment?

No. That requirement in MCOB 11.6.3R was removed. Affordability must instead be assessed under the Consumer Duty and PRIN 2A alongside the firm’s responsible lending policy, which is a different exercise rather than no exercise.

What happened to FG13/7 and FG24/2?

Both were withdrawn. Their substance now sits in MCOB 13.3.8AR and 13.3.8BG, requiring fair treatment of customers whose term has expired and that repossession is not pursued until other reasonable attempts have failed.