Mortgages UK - The Mortgage Code

This code has been superceded by guidelines from the Financial Services Authority, who have taken over regulation of the mortgage market. The details about the mortgage code are provided here for information only, as they are no longer in force.

The Mortgage Code is a code of conduct to be adhered to in the mortgage field and is over seen by the Mortgage Code Compliance Board. It is their job to make sure that you are fully informed as the borrower and sufficiently protected when taking out a mortgage. The Board make sure compliance through an ongoing curriculum of inspection and fulfilment cooperation visits. In addition, 'mystery shopping' and customer investigation exercises are regularly conducted to make sure that mortgage consumers are indeed getting the full benefits of the Code's protection.

Purpose of the mortgage code:

The Mortgage Code sets values of good practice as to how mortgage lenders and intermediaries deal with their customers. All mortgage lenders and intermediaries that are registered with the Board keep strictly to the rules and principles set out in the Mortgage Code.

The Mortgage Board is a non-statutory supervisory body. Its role is to regulate the supply and stipulation of mortgage advice in the UK by ensuring firms registered under the Mortgage Code, meet all the principles of the Code.

The Financial Services Authority regulates financial institutions and mortgage lenders. It also regulates the advertising of UK mortgages under the Financial Services and Markets Act.
You, as a prospective mortgage customer, must be given a copy of the leaflet 'You and Your Mortgage' at your first conversation about a mortgage. The leaflet outlines the standards to which mortgage lenders and intermediaries have to adhere.

When sourcing your mortgage you should check that your lender or intermediary is registered under the Mortgage Code. More than 150 lenders and 13,000 intermediary organizations, covering virtually the entire market, have registered under the Code. If a mortgage lender or intermediary fails to meet the standards of the Mortgage Code, and you, the borrower, suffer as a result, you have the right to seek compensation under an obligatory complaints procedure.

Advise of the DTI:

The DTI (Department of Trade and Industry) has put together a checklist of key questions of which customers should refer to when thinking of taking out a mortgage. This is based on information from research conducted on issues that have caused problems for customers. It is included as additional information that may be useful to you when choosing a mortgage, and to help you avoid potential problems.

1. What sum can I afford to borrow?

2. How do I go about knowing which mortgage rate is the best for me?

3. What method of repayment should I choose?

4. Do I have the option of making lump sum payments?

5. Will I incur redemption penalties?

6. Is compulsory insurance tied in with the mortgage?

7. Will there be UN foreseen charges to pay? - Examples may include intermediary's arrangement fees and lenders' application fees. The Mortgage Board's experience highlights the importance of having a full knowledge of all costs involved.

8. What happens in the eventuality I an unable to pay?

9. What about hidden clauses in the small print?

In addition it is recommended that you make yourself aware of the foundation on which interest is calculated on your mortgage.