Tailored support guidance and forbearance
The FCA aims to ensure that clients affected by the pandemic continue to be offered the support they need and that this support is tailored to the client: called ’tailored support’ by the FCA. This could potentially involve extended payment deferrals that must be reported on the client’s credit reference file. The FCA’s additional tailored support guidance can be viewed at .
This guidance applies with effect from 1 April 2021 and remains in force until varied or revoked. It applies in addition to the provisions of the FCA’s Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB), in particular MCOB 13: (see below).
The FCA expects lenders to be flexible and not to take a ’one size fits all’ approach but to consider the use of a range of short and long-term options, including:
•providing appropriate forbearance (ie, refraining from exercising a legal right, especially enforcing payment of a debt) that is in the client’s interests after consideration of their circumstances. Lenders should not repeatedly pursue the same forbearance option without reconsidering whether it remains appropriate or whether an alternative option should be explored;
•supporting clients through a period of payment difficulties and uncertainty, including by considering their other debts and essential living costs;
•ensuring they recognise and respond to the particular needs of vulnerable clients, especially those with ‘protected characteristics’ under the Equality Act 2010, such as physical or mental health disabilities;
•having systems, processes and adequately trained staff in place;
•reviewing arrangements regularly and, where a client’s circumstances have changed, reconsidering what support they need.
Lenders are expected to offer clients the support they may need to manage their finances, such as signposting to money guidance or referring them for debt advice.
Unless a client is unreasonably refusing to engage with a lender, the lenders should not start to repossess a client’s property solely on the ground that any deferred payments remain unpaid. The lender’s arrears and repossessions policy should specifically address this situation.
The FCA points out that the tailored support guidance continues to apply and lenders are still expected to consider appropriate forbearance arrangements for clients in financial difficulties and not to repossess a property unless all other reasonable attempts to resolve the position have failed. This is in line with the commitment made by signatories to the Mortgage Charter with effect from 26 June 2023 not to repossess a property within 12 months of a missed payment without the client’s consent, except in exceptional circumstances.
The FCA has stated that the tailored support guidance is also applicable to support to borrowers who are strugging with payments because of the cost of living (see also here).1 FCA, Guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living, FG 23/2, March 2023 So, if a customer indicates that they are experiencing or reasonably expect to experience payment difficulties due to the rising cost of living, firms should offer prospective forbearance to enable them to avoid, reduce, or manage any payment shortfall that would otherwise arise. This includes customers who have not yet missed a payment. The FCA amended its responsible lending rules in MCOB 11.6.3R from 30 June 2023 to support the implementation of the government’s Mortgage Charter.2HM Treasury, Mortgage Charter, June 2023, available at These changes mean that lenders do not need to undertake an affordability assessment as would usually be required under MCOB 11.6.2R when varying a mortgage agreement to enable a borrower to: •reduce their capital repayments under a repayment mortgage (including to zero or paying interest only) for up to six months;
•fully or partly reverse a term extension within six months of extending the term.
Previously, MCOB 11.6.2R was only disapplied where the variation was made solely for the purposes of forbearance where the borrower was already in arrears or to avoid the borrower falling into arrears, but it is now more widely available. This allows borrowers a temporary, contractual reduction in their monthly mortgage repayments, but they should be made aware that this will involve higher monthly payments after the temporary period is over and higher overall costs over the remaining term of the mortgage. Lenders must ensure that borrowers are provided with sufficient information to enable them to make an informed decision. These new rules will be reviewed after 12 months.