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MCOB Explained: The FCA Mortgage Rules You Need for CeMAP

The MCOB rules are the FCA's Mortgages and Home Finance: Conduct of Business sourcebook, the rulebook for regulated mortgage lending and advice in the UK since 31 October 2004. CeMAP tests them in MRT1 LO4, MRT2 AC5.3 and ASEW LO3: the regulated mortgage contract, advised and execution-only sales, the ESIS, MCOB 11.6 affordability and MCOB 13 arrears.

Updated 2026-10-30 · 12 min read · Checked against official sources

MCOB is the FCA's rulebook for mortgage lending and advice, and it runs through CeMAP® 2 and CeMAP 3 more than any other part of the FCA Handbook. Walbrook (LIBF) names it in MRT1 AC1.1, LO4 and AC5.5, in MRT2 AC5.3, and in ASEW AC3.1, AC3.2, AC3.5 and AC6.4. This guide maps the MCOB rules chapter by chapter to those criteria, then explains the rules that CeMAP questions test most: advised sales, the ESIS, affordability and arrears. MCOB applies across the UK, so the rules here are the same in England, Wales, Scotland and Northern Ireland; property law and repossession procedure differ, and we say where. For the module overview, see the CeMAP 2 (MORT) hub.

Where MCOB appears in the syllabus Criterion
MRT1 AC1.1 regulatory definitions in MCOB; LO4 role of lender and adviser; AC5.5 mortgage and second charge regulation
MRT2 AC5.3 MCOB rules on the use of remedies on default
ASEW/ASSC AC3.1 MCOB lending rules; AC3.2 MCOB advice rules; AC3.5 arrears and remedies; AC6.4 FSMA 2000, FS Act 2012 and MCOB

Source: the CeMAP qualification specification, Appendices 3 to 5.

What is MCOB, and what do the MCOB rules cover?

MCOB is the Mortgages and Home Finance: Conduct of Business sourcebook, the FCA Handbook section governing regulated mortgage lending and advice since 31 October 2004. Its rules cover advice, disclosure, affordability, charges and arrears for mortgages, home purchase plans and equity release.

MCOB applies to firms, not to customers. A lender, an adviser or a home reversion provider must follow it when it carries on a regulated activity, such as advising on, arranging or entering into a regulated mortgage contract. The powers behind it come from the Financial Services and Markets Act 2000 (FSMA), which ASEW AC6.4 names alongside the Financial Services Act 2012. Our guide to the FCA and PRA covers who makes the rules and how they enforce them.

The rulebook has grown in three big steps that CeMAP expects you to date:

Date Event What it changed
31 Oct 2004 Mortgage regulation begins ("M-Day") First charge home loans regulated; MCOB in force
2007 Home reversion and home purchase plans regulated Equity release and Islamic home finance brought in
26 Apr 2014 Mortgage Market Review (MMR) Evidenced affordability, interest-only limits, most sales advised
21 Mar 2016 Mortgage Credit Directive (MCD) ESIS replaced the KFI; second charge loans moved into MCOB; consumer buy-to-let regime
31 Jul 2023 Consumer Duty PRIN 2A applies to mortgage firms alongside MCOB

You can read every chapter on the FCA Handbook MCOB pages. Rules carry an "R", evidential provisions an "E" and guidance a "G"; CeMAP questions test the rules, and a few test the guidance examples.

Key fact: MCOB came into force on 31 October 2004. The MMR changes followed on 26 April 2014 and the MCD changes on 21 March 2016.

What is a regulated mortgage contract?

A regulated mortgage contract is a loan to an individual or trustees, secured by a first or second legal charge on UK land, at least 40% of which the borrower or a related person uses, or will use, as a dwelling. MRT1 AC1.1 tests it.

Each part of the definition decides real cases:

  • Borrower. An individual or trustees. A loan to a limited company is not a regulated mortgage contract, even if a director lives in the house.
  • Security. A first or second legal charge. Before 21 March 2016 only first charges counted; the MCD brought regulated second charge loans in, which is MRT1 AC1.3.
  • Location. Land in the UK. A loan secured on a holiday home in Spain is outside the definition.
  • Occupancy. At least 40% used as a dwelling by the borrower or a related person, such as a spouse, civil partner, parent, child or sibling. A buy-to-let let to strangers fails this test; one let to the borrower's mother passes it.

MRT1 AC1.2 asks for the legal definition as well. In law a mortgage is security for a debt: the borrower (mortgagor) grants the lender (mortgagee) a charge over the property, which the lender can enforce on default. In Scotland the equivalent is a standard security. The regulatory definition decides whether MCOB applies; the legal definition decides what the lender can do.

Which loans sit outside MCOB?

Business buy-to-let to unrelated tenants, loans to companies, and most commercial lending are unregulated. Consumer buy-to-let, where a landlord did not set out to run a letting business, is regulated under the Mortgage Credit Directive Order 2015, not MCOB. Our buy-to-let guide sets out that split. Practise the definitions with the MRT1 LO1 definitions drill.

Exam tip: In a "regulated or not?" question, test the four parts in order: who borrows, what charge, where the land is, and who lives there.

Which MCOB chapters matter for CeMAP?

The MCOB chapters that matter most for CeMAP are MCOB 4 (advising and selling), 5A and 6A (disclosure and the offer), 8 and 9 (equity release), 11 (responsible lending), 12 (charges) and 13 (payment difficulties and repossessions). MRT1 LO4 and ASEW LO3 test them together.

Chapter titles below are as the FCA Handbook shows them on 30 October 2026:

Chapter Title Where CeMAP tests it
MCOB 1 Application and purpose MRT1 AC1.1 (who and what MCOB covers)
MCOB 2 and 2A Conduct of business standards: general; Mortgage Credit Directive MRT1 AC5.5
MCOB 3A Financial promotions and communications with customers MRT1 LO4
MCOB 4 Advising and selling standards MRT1 AC4.2; ASEW AC3.2 and AC4.2
MCOB 5A MCD Pre-application disclosure (the ESIS) MRT1 AC4.1; ASEW AC3.1
MCOB 6A MCD disclosure at the offer stage MRT1 AC4.1; ASEW AC3.1
MCOB 7, 7A and 7B Disclosure at the start of the contract and after sale; further advances MRT2 AC1.1
MCOB 8 and 9 Equity release: advising and selling standards; product disclosure MRT2 AC1.5 and AC6.3; ASEW AC4.3
MCOB 10A MCD Annual Percentage Rate of Charge (APRC) ASEW AC3.1
MCOB 11 and 11A Responsible lending; additional MCD responsible lending requirements MRT1 AC6.1; ASEW AC1.2 and AC4.1
MCOB 12 Charges MRT1 LO8
MCOB 13 Payment difficulties and repossessions MRT2 LO4–LO5; ASEW AC3.5

Two of these carry a lot of marks in our reading. MCOB 11 underpins every affordability question, and MCOB 13 underpins every arrears question. Each has its own guide: mortgage affordability and mortgage arrears and repossession.

MCOB 12 deserves a line of its own. It requires early repayment charges to be a reasonable pre-estimate of the lender's costs of early repayment, and arrears charges to be fair. That is why a question offering "the lender may set any early repayment charge it likes" is wrong.

Key fact: The reflection period sits in MCOB 6A, not MCOB 6. MCD rules are the chapters with an "A" after the number.

When must a mortgage sale be advised?

A mortgage sale must be advised when the customer wants a right-to-buy mortgage, when debt consolidation is the main purpose, or when the loan is a shared equity credit agreement. MCOB 4.8A.7R bars execution-only for these three cases, subject to listed exceptions.

Most sales are advised in practice, because firms find it hard to meet the execution-only conditions. When a firm advises, MCOB 4.7A requires the recommendation to be suitable: appropriate to the customer's needs and circumstances. If nothing in the firm's range is suitable, it must say so and must not recommend the "least worst" product.

The exceptions to the execution-only ban

MCOB 4.8A lets a firm sell execution-only even in a barred case where:

  1. the customer is a high net worth mortgage customer, meaning net income of £300,000 or more, or net assets of £3m or more;
  2. the sale is a variation or product switch with the existing lender, with no extra borrowing, and all eligible products are presented;
  3. the customer has rejected advice and chooses to proceed.

For any execution-only sale the customer must specify the lender, rate, rate type, property value, term, amount and repayment method, and must be told that they lose the protection of a suitability assessment. Until 22 July 2025 an "interactive dialogue" between firm and customer also forced advice; the FCA deleted that trigger in PS25/11.

What advised and execution-only questions test (our reading)

Spotting the barred case in a scenario and knowing the high net worth thresholds. Trap: "every remortgage must be advised". Practise with the MRT1 MCOB roles drill.

Exam tip: Debt consolidation bars execution-only only when it is the main purpose of the loan. A small card balance cleared from a larger remortgage does not.

What must the ESIS show, and when?

The ESIS, or European Standardised Information Sheet, is the MCOB 5A illustration a customer must receive before a mortgage application is submitted. It replaced the Key Facts Illustration (KFI) on 21 March 2016 and sets out costs, features and risks in standard form.

MCOB 5A.4.1R sets the timing. A firm must give an ESIS:

  1. before the application is submitted;
  2. when advice is given, or within 5 business days of advice given by phone;
  3. when the customer asks for one;
  4. for an execution-only sale, once the product has been identified.

Content follows a fixed template so customers can compare lenders. It shows the lender and any intermediary, the amount and term, the rate and how it can change, the monthly payment, the total amount payable, the Annual Percentage Rate of Charge (APRC), fees, early repayment charges, flexible features and the consequences of not keeping up payments. The APRC is calculated under MCOB 10A and includes the interest and most charges, so it lets customers compare deals on a like-for-like basis.

The offer and the reflection period

After the application, the lender makes a binding offer. MCOB 6A.3.4R gives the customer a reflection period of at least 7 days after the offer, during which the offer stays binding on the lender and the customer may accept at any time. There is no cancellation right for the mortgage itself. A 14-day cancellation right exists only for a broker services contract made at a distance.

What ESIS questions test (our reading)

The timing, nearly always. Trap: "the ESIS is given with the offer". Practise with the MRT1 MCOB roles drill and the free MRT1 mock 1.

Key fact: "Mortgage illustration" and "key facts illustration" are older names. For regulated mortgages today, the illustration is the ESIS.

What does MCOB 11.6 require on affordability?

MCOB 11.6.2R requires a lender, before entering into or varying a regulated mortgage contract, to assess whether the customer can pay the sums due, and to proceed only if it can show the loan is affordable. MCOB 11.6.5R sets what the assessment must include.

The assessment must use net income, after income tax and National Insurance, and as a minimum the customer's committed expenditure plus basic essential expenditure and basic quality-of-living costs. It must not rely on equity in the property or on expected price growth (MCOB 11.6.5R), and it must not accept a general declaration of affordability (MCOB 11.6.6R). Income must be evidenced (MCOB 11.6.8R).

Under MCOB 11.6.18R the lender must consider likely rates over at least five years and assume a rise of at least 1%, unless the rate is fixed for five years or more. Interest-only lending needs a clearly understood, credible repayment strategy (MCOB 11.6.41R). The exceptions in MCOB 11.6.3R let a like-for-like product switch with no extra borrowing go ahead without a full check.

The full method, with a worked example and the loan-to-income limit, is on our mortgage affordability guide. The rules on MCOB 11.6 are short enough to read in full.

Exam tip: Affordability is the lender's duty under MCOB 11. Suitability is the adviser's duty under MCOB 4. Questions test which party owns which test.

What does MCOB 13 require when a borrower is in arrears?

MCOB 13 requires a lender to deal fairly with any customer who has, or may have, payment difficulties, to make reasonable efforts to agree a way forward, and to treat repossession as a last resort. MRT2 AC5.3 and ASEW AC3.5 test it.

The chapter's title on the Handbook is "Payment difficulties and repossessions: regulated mortgage contracts and home purchase plans". Its core requirements:

  • consider forbearance, including a term extension, a change of mortgage type, deferring or reducing payments, reducing the rate, and capitalising arrears (never automatic where material);
  • signpost free debt advice and, within 15 business days of arrears arising, send the MoneyHelper information sheet with details of the missed payments, charges and balance;
  • explain the impact of each option on the customer's credit file;
  • if a sale leaves a shortfall, tell the customer within 6 years of the sale (5 years in Scotland) if the lender intends to recover it.

Changes from PS24/2 took effect on 4 November 2024, and rules for customers whose term has expired took effect on 22 July 2025. The court stage, the Pre-action Protocol in England and Wales and the Scottish procedure are on our mortgage arrears guide.

Key fact: MCOB 13 protects customers who "may have" payment difficulties as well as those already in arrears. Forbearance can start before a payment is missed.

How do the Consumer Duty and the FCA mortgage rule review affect MCOB?

The Consumer Duty, Principle 12 in PRIN 2A, has applied to mortgage firms since 31 July 2023 and to closed products since 31 July 2024. It sits beside MCOB and requires firms to deliver good outcomes for retail customers across four areas.

Those four outcomes are products and services, price and value, consumer understanding, and consumer support. The FCA Consumer Duty page sets them out. For mortgages, the Duty shapes how lenders handle customers on reversion rates, how brokers judge whether their fees give fair value, and how firms support vulnerable customers. The CeMAP syllabus does not name the Consumer Duty. It links most closely to FRE2 AC7.1, "harm to consumers", and to the "fair outcome" wording of MRT1 LO6.

The FCA mortgage rule review (dated)

In PS25/11, effective 22 July 2025, the FCA made three changes: a new lender may use modified affordability on a remortgage with no extra borrowing where the new deal is more affordable; term reductions no longer need a full affordability check; and the "interactive dialogue" execution-only trigger was removed. A second consultation, CP26/18 (9 June to 28 July 2026), proposed changes on interest-only, retirement interest-only, variable income, credit-impaired borrowers and bridging. As of 30 October 2026 those proposals are not final rules, so do not treat them as rules in an exam answer. The FCA's mortgage rule review page tracks progress.

Exam tip: If an answer quotes the Consumer Duty as "MCOB 14", it is wrong. MCOB 14 covers a narrow class of MCD credit agreements; the Duty is in PRIN 2A.

Your MCOB rules study plan

Your MCOB rules study plan takes about 10 hours over two weeks: learn the regulated mortgage contract test and the chapter map in week 1, then MCOB 4, 5A, 6A, 11 and 13 in week 2, finishing with a timed 50-question MRT1 mock.

Step Focus Practice
1 Definitions: the four-part regulated mortgage contract test MRT1 definitions drill
2 Chapter map, MCOB 4 execution-only rules, ESIS timing MRT1 MCOB roles drill
3 MCOB 11.6 and MCOB 13 in scenarios ASEW regulation drill
4 Timed check Free MRT1 mock 1

Start with the free MRT1 diagnostic, 20 questions in 30 minutes, to see where MCOB costs you marks. The MRT1 unit guide places these rules among the other ten learning outcomes, and CeMAP 3 tests the same rules inside case studies. For the equity release chapters, read our equity release guide. Our free study notes summarise the rules for revision.

Mocks 2 to 10 and the topic drills are part of Pro: £6.99 a week, £11.99 a month or £22.99 for three months, for all five units. Our readiness rule is three mocks in a row at 85% or more, with every topic at 80% or more. It is a guide, and there is no pass guarantee.

10 free MRT1 practice questions with answers

Try each one, then open the answer. For a timed experience use the free mock exam.

  1. 1. Victor is a high net worth mortgage customer with evidence of his status. He wants a remortgage, mainly to consolidate debts, on an execution-only basis. May the firm proceed?

    1. A. No, unless he first takes advice and then rejects it
    2. B. Yes, because the debt consolidation ban does not apply to high net worth customers
    3. C. Yes, but only if the remortgage is with his existing lender
    4. D. No, because debt consolidation can never be arranged on an execution-only basis
    Show answer

    B. Yes, because the debt consolidation ban does not apply to high net worth customers

    MCOB 4.8A.7R bans execution-only sales where the main purpose is debt consolidation, but MCOB 4.8A.9R says that ban does not apply to a high net worth mortgage customer. The firm should first have evidence under MCOB 1.2.9CR.

  2. 2. Why do eligible counterparties receive less regulatory protection than retail customers?

    1. A. They are only ever borrowers, never lenders, in financial transactions
    2. B. They always borrow only from overseas lenders outside the FCA's remit
    3. C. They are institutions treated as able to look after their own interests
    4. D. They have opted out of all regulation by signing a written waiver
    Show answer

    C. They are institutions treated as able to look after their own interests

    Eligible counterparties are professional institutions such as banks, insurers and governments (COBS 3.6.2R). They are regarded as the most expert class of client and so receive the lowest level of conduct protection.

  3. 3. A firm's staff tell customers that taking advice will 'slow things down' and suggest they go execution-only. Which MCOB rule does this breach?

    1. A. MCOB 4.8A.5R, which bans encouraging customers to opt out of advice
    2. B. MCOB 11.6.24R, which requires an annual review of the lending policy
    3. C. MCOB 6A.3.4R, which sets the minimum length of the reflection period
    4. D. MCOB 7.5.1R, which requires an annual statement to be sent
    Show answer

    A. MCOB 4.8A.5R, which bans encouraging customers to opt out of advice

    MCOB 4.8A.5R says a firm must not encourage a customer to opt out of receiving advice, or to reject advice. MCOB 4.8A.6G adds that firms should not steer customers into execution-only sales.

  4. 4. Mia has a £100,000 interest-only mortgage at 4%. She extends the term from 20 to 30 years at the same rate. What happens?

    1. A. The monthly payment rises, because the interest is spread over more years
    2. B. The monthly payment falls, because the capital is spread over more years
    3. C. The monthly payment stays at £333.33, but she pays interest for ten more years
    4. D. The monthly payment stays the same, and the total interest falls
    Show answer

    C. The monthly payment stays at £333.33, but she pays interest for ten more years

    On interest-only, the payment is the interest alone: £100,000 × 4% ÷ 12 = £333.33, whatever the term. A longer term means paying interest for ten more years, and the capital is still due at the end.

  5. 5. A lender is weighing two flats of equal value. Flat A is in a low-rise block with a long lease. Flat B has a 55-year lease. Why does the lender prefer Flat A?

    1. A. Flat B's shorter lease makes it a weaker, declining security
    2. B. Flat A will automatically become freehold after ten years
    3. C. Flat B cannot be insured because of its lease length
    4. D. Flat A attracts a lower rate of stamp duty
    Show answer

    A. Flat B's shorter lease makes it a weaker, declining security

    A lease is a wasting asset: as the unexpired term falls, value and saleability decline, and the cost of extending rises. A lender wants security that holds its value over the mortgage term, so a long lease is stronger security than a short one.

  6. 6. Under the Consumer Rights Act 2015, what standard must a surveyor meet when providing a RICS Home Survey to a consumer?

    1. A. The surveyor must guarantee the property has no defects
    2. B. The service must be performed with reasonable care and skill
    3. C. The survey must be completed within seven days
    4. D. The surveyor must match the lender's valuation
    Show answer

    B. The service must be performed with reasonable care and skill

    Section 49 of the Consumer Rights Act 2015 implies a term into every contract for a trader to supply a service that it will be performed with reasonable care and skill. A surveyor does not guarantee that a property is defect-free.

  7. 7. Kai wins an unconditional auction, but his mortgage lender cannot complete within the 20 business days allowed. Which type of finance is commonly used to complete on time?

    1. A. A personal loan secured on his car for the balance
    2. B. A credit card cash advance for the full purchase price
    3. C. A short-term bridging loan, later refinanced by a mortgage
    4. D. A lifetime mortgage on the auction property itself
    Show answer

    C. A short-term bridging loan, later refinanced by a mortgage

    Bridging finance can be arranged quickly to complete an auction purchase within a short deadline, with a term mortgage taken later to repay it. The buyer needs a credible exit strategy, as MCOB 4.7A.12R requires for regulated bridging loans.

  8. 8. Bank Rate is 3.75%. Josie has a £200,000 interest-only tracker mortgage at Bank Rate plus 1%. What is her monthly interest payment?

    1. A. £9,500.00
    2. B. £791.67
    3. C. £625.00
    4. D. £166.67
    Show answer

    B. £791.67

    Her rate is 3.75% + 1% = 4.75%. Annual interest is £200,000 × 4.75% = £9,500, so the monthly payment is £9,500 ÷ 12 = £791.67. A tracker payment changes whenever Bank Rate changes.

  9. 9. A lender has no previous relationship with Ella, who says she has net assets of £4 million. What must it obtain before treating her as a high net worth mortgage customer?

    1. A. A signed declaration from Ella herself confirming that her net assets exceed £3 million
    2. B. A signed statement from the lender's in-house accountant confirming her net assets
    3. C. A valuation report showing that the property she is buying is worth over £3 million
    4. D. A signed statement from her own qualified professional adviser confirming her status for a stated period
    Show answer

    D. A signed statement from her own qualified professional adviser confirming her status for a stated period

    MCOB 1.2.9CR allows HNW treatment only where the firm already holds evidence from an existing business relationship, or has a written statement confirming the status. The statement must give a validity period covering the date of the contract and be signed by a suitably qualified professional adviser who is not an associate of the firm or the customer.

  10. 10. A lender takes an assignment of Ravi's life assurance policy as additional security for his interest-only mortgage. What does the lender gain?

    1. A. Ownership of the property free of Ravi's interest
    2. B. The right to increase the premiums without Ravi's consent
    3. C. The right to change the life assured on the policy
    4. D. The right to receive the policy proceeds to repay the loan
    Show answer

    D. The right to receive the policy proceeds to repay the loan

    By assignment the lender becomes entitled to the policy proceeds, which it applies to reduce or repay the debt. Assignment of life policies was common with endowment mortgages and is still used for some interest-only and business lending.

Frequently asked questions

+What does MCOB stand for?

MCOB stands for Mortgages and Home Finance: Conduct of Business sourcebook. It is the part of the FCA Handbook that sets the conduct rules for regulated mortgages, home purchase plans and equity release.

+Is buy-to-let covered by MCOB?

Most buy-to-let lending is not, because the borrower does not live in the property, so it is not a regulated mortgage contract. A buy-to-let let to a close family member is regulated. Consumer buy-to-let has its own lighter regime under the MCD Order 2015, not MCOB.

+What is the difference between MCOB and COBS?

MCOB sets the conduct rules for mortgages and home finance. COBS, the Conduct of Business sourcebook, covers investment business such as pensions and investment advice, and ICOBS covers insurance. A mortgage adviser selling protection works under ICOBS for that part of the sale.

+What is MCOB 11.6?

MCOB 11.6 is the FCA's responsible lending section. It requires a lender to assess, before lending or varying a regulated mortgage, whether the customer can afford it, using evidenced net income, committed and essential spending, and a stress test for future rate rises.

+Does MCOB apply to second charge mortgages?

Yes. Second charge mortgages on homes moved from the Consumer Credit Act regime into MCOB on 21 March 2016, when the Mortgage Credit Directive took effect. MCOB has separate stress-test rules for second charge lenders.

+What replaced the KFI?

The European Standardised Information Sheet (ESIS) replaced the Key Facts Illustration for most regulated mortgages from 21 March 2016. The KFI is still a term you may meet in older study material and in some questions about the history of disclosure.

+Is the Consumer Duty part of MCOB?

No. The Consumer Duty sits in PRIN 2A of the FCA Handbook, as Principle 12. It applies to mortgage firms alongside MCOB, and it raises the standard that MCOB rules are read against, but it is not an MCOB chapter.

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