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In this guide
Sourcing Brain v3.0 contains the FCA requirements surrounding the need to source on the lowest cost products. Full details of all of these changes are documented below.
FCA Cost Column
The FCA are implemented rules surrounding the cost of the mortgage. Details of this change is documented below and should have been adopted by 30th July 2020.
Cost of the mortgage
This rule applies if the firm’s product range includes more than one regulated mortgage contract that is appropriate to the needs and circumstances of the customer (see MCOB 4.7A.5R and 4.7A.6R).
the firm advises the customer to enter into a particular regulated mortgage contract; and
that regulated mortgage contract is not the cheapest of those contracts in the firm’s product range which are appropriate to the needs and circumstances of the customer; the firm must explain to the customer why it is advising the customer to enter into that regulated mortgage contract rather than any other cheaper regulated mortgage contract in the firm’s product range which is appropriate to the needs and circumstances of the customer.
For the purposes of this rule:
one regulated mortgage contract (“contract A”) is cheaper than another (“contract B”) if the total amount payable under contract A in respect of the relevant period is less than the total amount payable under contract B in respect of the relevant period;
the “total amount payable” means:
the aggregated monthly payments; and
includes any product fee or arrangement fee if the customer proposes to pay that fee directly rather than add it to the sum advanced under the contract (and such a fee must be treated in the same way for contract A and contract B when comparing the two contracts);
the “relevant period” means:
any discounted or introductory period under contract A; or
the term of contract A; and
monthly payments should be calculated on the assumption that there is no variation to the interest rate that would apply if the regulated mortgage contract were to be entered into immediately, unless the contract expressly varies the interest rate (in which case, the monthly payments should be calculated by reference to rates specified in the contract in relation to the relevant periods).
Mortgage Details > Order results by
Changes have been made to Sourcing Brain to address the requirements. From the Mortgage Details tile, the ‘Order results by’ option can be set to default to the FCA Cost column therefore automatically displaying the scheme list in numerical order, low to high, based on the FCA Cost column.
Within the scheme list itself, a new column has now been included called ‘FCA Cost (Nyrs Nmths)'. This will calculate in years and months.
The ‘tool tip’, which is displayed when hovering over the column heading with your mouse, provides the explanation as to how the column is calculated.
Within the Help section, there is also an explanation as to the calculation of column, which can be found within the Cost Over Period Calculations. This section provides a detailed explanation as to what is included in all of the calculated columns within MortgageBrain sourcing.
Illustration and supporting documentation
When producing an illustration and the supporting documentation, there is now additional wording included within the Filters/Product Selection Report letter as shown below.
Cost Columns calculated in years and months
Sourcing now allows you to calculate the total cost over years and months. This is reflected on all of the calculated columns displayed within the scheme list.