Are second charge mortgages regulated by the FCA?
Most second charge mortgages on a home for a consumer purpose are regulated by the Financial Conduct Authority. The exact position depends on the mortgage contract and the borrower's circumstances, so it is important not to assume every loan secured on property has identical protections. FCA mortgage rules are set out in MCOB.
The starting point for most residential second charge borrowing is that it sits within the FCA's regulated mortgage regime, covered by the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB). More on how a second charge works alongside a first mortgage is available on the second charge mortgages hub.
What FCA rules apply to a regulated second charge mortgage?
For regulated mortgages, FCA rules cover areas including fair communications, information before an application or offer, responsible lending and affordability, mortgage charges, and the treatment of payment shortfalls and repossessions. The rules are detailed and their application depends on the transaction, so this guide is a general overview.
Broad themes covered by MCOB include:
- Clear, fair and not misleading financial promotions and communications
- Information provided before an application and before an offer is made
- Responsible lending and affordability assessment
- Disclosure of charges, including APRC and fees
- How arrears, payment shortfalls and repossessions are treated
Fee-related detail is covered separately in second mortgage fees and APRC explained.
Are buy-to-let or business-purpose second charges regulated?
A second charge used for buy-to-let or business purposes may not be regulated in the same way as a residential consumer mortgage. Some consumer buy-to-let arrangements have a different regulatory treatment. The purpose, property use and borrower's circumstances matter, so the regulated firm involved needs to confirm the applicable status.
Regulatory scope can depend on whether a property is the borrower's home, whether it is let, and how the borrowing is used. Consumer buy-to-let is treated as a distinct category from standard buy-to-let lending. Anyone unsure of a transaction's status can ask the firm involved to confirm it directly.
How can you check whether a firm is authorised?
The FCA Financial Services Register shows whether a firm is authorised and the activities it is permitted to carry on. Search using the firm's legal name and independently verified contact details. The register does not replace reading the agreement or confirming how the particular mortgage is regulated.
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Sources
- MCOB handbook (Financial Conduct Authority)
- Financial Services Register (Financial Conduct Authority)
- Consumer Duty (Financial Conduct Authority)
- Second charge or second mortgages (MoneyHelper)
Frequently asked questions
Are second charge mortgages regulated by the FCA?
Most second charge mortgages secured on a home for a consumer purpose are regulated by the Financial Conduct Authority. The exact position depends on the mortgage contract and the borrower's circumstances, so it is important not to assume every loan secured on property has identical protections. FCA mortgage rules are set out in MCOB.
Is a buy-to-let second charge mortgage FCA regulated?
A buy-to-let second charge may not be regulated in the same way as a residential consumer mortgage, and some consumer buy-to-let arrangements have a different regulatory treatment. The purpose, property use and the borrower's circumstances all matter, so the regulated firm involved needs to confirm the applicable status for that transaction.
Can I check a mortgage broker on the FCA Register?
Yes. The FCA Financial Services Register shows whether a firm is authorised and the activities it can carry out. Searching by the firm's legal name and independently verified contact details helps confirm the correct entry. The register is a useful independent check before proceeding with any mortgage enquiry or application.
What does MCOB stand for?
MCOB stands for Mortgages and Home Finance: Conduct of Business, which is the section of the FCA Handbook covering regulated mortgage contracts. It sets rules on areas including communications, disclosure, responsible lending and how arrears or repossessions are treated, and it applies to firms carrying out regulated mortgage activities.