The Mortgage Code
This is a voluntary code followed by lenders
and mortgage intermediaries in their relations with
personal customers in the United Kingdom. It sets
standards of good mortgage lending practice which are
followed as a minimum by those subscribing to it.
Level of Service
As a voluntary code, it allows competition and market
forces to operate to encourage higher standards for the
benefit of customers. Your adviser is a Mortgage
Intermediary and will act on your behalf.
Choosing a mortgage may be your most important financial
commitment. We will offer advice and a recommendation as
to which mortgage is suitable for you. When giving
advice, we will take care to help you select a mortgage
to fit your needs by asking for relevant information
about your circumstances and objectives.
Fees and Charges
Our advice will
also depend on your particular requirements and on the
market conditions at the time. We will normally base our
research on the market as a whole, but where it is
limited to a selection of lenders, we will give you
The reasons for the recommendation will be given
to you in writing before you complete your mortgage.
We sometimes receive a fee for arranging your mortgage.
Before you take out a mortgage, we will tell you the amount of any
fee in writing. If the fee is less than £250, we will
confirm that we will receive up to this amount. If the
fee is £250 or more, we will tell you the exact amount.
Occasionally, we will receive a fee in some form other
than cash – e.g., computer software, Air Miles – if this
occurs, we will tell you about these ancillary benefits.
We will tell you the charges for any other service or
product before or when it is provided or at any time you
There are a number of alternative types of mortgage that
can be available at any given time. The most common are:
- A variable rate mortgage, where
the amount of your monthly repayment is linked to
the mortgage interest rate charged by your
lender. If the mortgage rate is increased, the
amount of your monthly repayment increases.
Conversely, when the mortgage rate decreases, so
does the amount of your monthly repayment. The
change in your monthly payment is calculated to
ensure that the mortgage loan is on course to be
repaid within the agreed term.
- A fixed rate mortgage, where the
interest rate charged is fixed at a certain level
for a set period of time. Whilst during this
period you would be protected from any increase
in monthly payments, caused by an increase in
variable mortgage rates, you would not benefit
from any decrease in monthly payments, caused by
a reduction in those rates.
However, during the fixed rate period, you would
know exactly how much your gross mortgage
payments would be.
- A capped rate mortgage is a
variable rate mortgage, with a specific maximum
interest rate that can be charged, for a set
period. In other words, whilst your mortgage
payments will be affected by movements in the
Mortgage rates, you will know the maximum rate
that could be charged during the set period and
hence be protected from rates higher than the
maximum limit. (A collared rate is a specified
minimum rate, hence a capped and collared
Mortgage will be a variable rate mortgage, where
the rate will be limited between a known minimum
- A discounted rate mortgage is a
variable rate mortgage, which allows a known
reduction in the mortgage rate charged for a set
term. This differs from a deferred
rate mortgage, where instead of allowing a
discount in the rate charged, a reduced monthly
payment is allowed, with the shortfall being
added to the mortgage debt.
At the end of any fixed, capped or discounted rate
period, your mortgage will revert to a variable rate.
This may be higher than the rate you have been paying. In
some cases, the lender may offer you an alternative rate.
Please refer to your mortgage offer letter for details.
Some fixed, capped and discounted rate mortgages can be
continued if you move house during the term of the offer
rate. Please refer to your mortgage offer letter to see
if this applies.
There are two ways in which you can repay your mortgage.
These are capital and interest repayment (where
the mortgage is often referred to as a repayment
Mortgage) and interest payment
(where the mortgage is often referred to as an interest
With a repayment mortgage, your monthly payments cover
the interest charged and also include an element of
capital repayment. You will therefore see your mortgage
debt decreasing over a period of time. It should be noted
that in the early years, most of each payment is used to
cover the interest charged. As the mortgage debt
decreases, a higher proportion of each monthly payment is
used towards capital reduction.
The lender may insist that life cover be in place to
cover the mortgage debt.
With an interest only mortgage, your monthly payments
only cover the interest charged and therefore the
Mortgage debt will remain at a constant level. In most
cases, the lender will insist that you have an investment
plan that will pay out a lump sum at the end of the
Mortgage term to repay the mortgage debt. In addition, it
is usual for the lender to insist that life cover be in
place to cover the mortgage amount. The plans most
commonly used for this purpose are a low cost endowment
plan, a personal pension plan or a unit trust type plan.
Endowment plans have life cover built into them, whereas
pension plans and unit trust type plans do not. In these
cases, separate life cover would be necessary.
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP
REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.
Repayment of Your Mortgage
Your home is at risk if you fail to ensure that your
Mortgage loan is repaid by the end of its term. It is
your responsibility to ensure that your mortgage is
repaid on time.
Early Repayment of Your Mortgage
If you have an interest only mortgage, it is also your
responsibility to ensure that you have an investment plan
in place to repay the mortgage debt.
If you wish to repay your mortgage early, perhaps to move
again or remortgage, you may have to pay an early
redemption penalty. Please check the details of any
Mortgage offer you receive so that you are aware of the
conditions and that they suit your requirements, before
Changes in Personal Circumstances
If you are taking out a mortgage with a partner, or with
others, each person is responsible jointly and
individually for the repayments.
Other Mortgage Related Services
Therefore, if there is a breakdown of the relationship,
the lender can seek repayment of the full amount of the
loan from each of the parties to the mortgage.
Should you be unable to work due to perhaps accident,
sickness or unemployment, you will still have to meet
your repayments. Insurances are available to cover you
against these possibilities. You should also ensure that
you have adequate life assurance cover for your mortgage.
We can also arrange Buildings and Contents
Insurance, as well as Accident, Sickness
and Unemployment Insurance.
Mortgage Indemnity Guarantee (MIG)
You will be required to arrange Buildings Insurance, by
the lender, to cover the rebuilding of your property
should it be damaged.
Some lenders also insist that you take out Contents
Insurance and /or Accident, Sickness and Unemployment
Insurance. Please refer to your mortgage offer letter to
check whether any such condition applies and if so, that
it is acceptable to you.
Some lenders may insist that any insurance cover is
arranged through them. Again, you should refer to your
Mortgage offer letter to check this and if so, that it is
acceptable to you.
If your mortgage represents a high percentage of the
price or valuation of your property (usually 75% or more)
you may have to pay a high percentage lending fee. Some
or all of this fee may be used by the lender, at its
discretion, to obtain mortgage indemnity insurance to act
as extra security for its sole benefit. If this is the
case, the lender will give you a written explanation,
- Such insurance will not protect you if your property is
subsequently taken into possession and sold for less than
the amount you owe;
- You will remain liable to pay all sums owing, including
arrears, interest and your lender’s legal fees;
If a claim is paid to your lender under such insurance,
the insurers generally have a right to recover this
amount from you.
Credit Reference Agencies
These are organisations, licensed under the Consumer
Credit Act 1974, which hold information about individuals
which is of relevance to lenders. Lenders may refer to
these agencies for information that may assist them
making various decisions, for example whether or not to
provide a mortgage loan. The enquiry they make may also
be recorded on your file at a Credit Reference Agency.
Details of the conduct of your account may be passed to a
Credit Reference Agency by the lender if your payments
fall into arrears. They have a duty to advise you should this occur.
We will treat all of your personal information as private
and confidential, even when you are no longer a customer,
except where disclosure is made at your request or with
your written consent in relation to arranging your
Mortgage. However, we may disclose details to the
Financial Options Group Limited and/or their regulatory
authorities and auditors for the purpose of compliance.
Monitoring and Compliance
We have a Mortgage Code compliance officer and our
internal auditing procedures will include monitoring
compliance with the Code.
The Mortgage Code is monitored by the Mortgage Code
Compliance Board who also keep a list of mortgage
intermediaries that have undertaken to comply with the
Code. Their address is The Mortgage Code Compliance
Board, Festival Way, Festival Park, Stoke on Trent,
Staffordshire ST1 5TA. Tel: 01782 216300
Complaints concerning the general operation of the Code
by mortgage intermediaries can be made to them.
We have internal procedures for handling complaints
fairly and speedily and we will tell you what these are.
These will include establishing a set time for an initial
acknowledgement to your complaint. We will tell you how
long it might take us to respond more fully.
The Mortgage Code
If you wish to make a complaint, please write to the
Mortgage Code Complaints Officer, Simply Independent
Limited, 117 London Road, East Grinstead, West Sussex
The arbitrators of the Mortgage Code are available to
resolve certain complaints made by you if the matter
remains unresolved through our internal complaints
procedure. Please write to the Mortgage Code Arbitration
Scheme, The Chartered Institute of Arbitrators, 24 Angel
Gate, City Road, London EClV 2RS. Tel: 0171 837 4483
Where applicable, we will display a notice stating that
we belong to the Mortgage Code Arbitration Scheme and
that copies of the Code are available upon request.
This Code applies to all loans (not overdrafts) secured
on the home, which you, as a personal customer, own and
occupy, unless the loan is governed by the Consumer
Credit Act 1974 (when the provision and protection of
that Act apply to your loan). The Code does not apply to
the selling of investments that are covered by the
Financial Services Act 1986. The Personal Investment
Authority, who regulate the selling of such investments
do not regulate mortgages, loans, building and contents
insurance, or accident, sickness and unemployment
Enquiries about the Code and requests for
copies of it can be addressed to either: The Council of
Mortgage Lenders, 3 Saville Row, London. W1X 1AF. Tel:
0171 440 2255 or The Mortgage Code Compliance Board,
Festival Way, Festival Park, Stoke on Trent,
Staffordshire ST1 5TA. Tel: 01782 216300.
All subscribers to the Code will make copies available to
Copies of the Banking Code are available from British
Bankers’ Association, Pinners Hall, 105 – 108 Old
Broad Street, London EC2N 1EX. Tel: 020 7216 8800
Additional information on a variety of mortgage matters
is available in the form of “Fact Sheets”
available from The Council of Mortgage Lenders.