In this guide...

Sourcing Brain v3.5 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 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

4.7A.23A R

  1. 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).

  2. If:

    1. the firm advises the customer to enter into a particular regulated mortgage contract; and

    2. 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.

  3. For the purposes of this rule:

    1. 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;

    2. the “total amount payable” means:

      1. the aggregated monthly payments; and

      2. 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);

    3. the “relevant period” means:

      1. any discounted or introductory period under contract A; or

      2. the term of contract A; and

    4. 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).

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Sourcing tab > Mortgage Details > Order results by

From the Sourcing tab, the Mortgage Details section provides the ability to Order results by FCA Lowest Cost. This will display the scheme list in numerical order, low to high, based on the FCA Cost column.

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Scheme List

The scheme list displays this column, titled ‘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 Mortgage Brain sourcing.

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Illustration and supporting documentation

When producing an illustration and the supporting documentation, there is additional wording included within the Filters/Product Selection Report letter as shown below.

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