Under MCOB rules on responsible lending, affordability may be assessed on the basis of:

Under MCOB rules on responsible lending, affordability may be assessed on the basis of:

• A. The mortgage interest, plus pension contributions
• B. All disposable income
• C. Mortgage repayments only
• D. None of the above

Answer: (A)

Affordability checks under MCOB hinge on ongoing commitments a borrower must meet, not just gross income. Considering the mortgage interest payments along with regular pension contributions captures two fixed, non-discretionary outgoings that reduce the money available to service the loan. This approach reflects the borrower’s real capacity to keep up payments over time, especially if interest rates rise or circumstances change. Using all disposable income would overstate what’s realistically available because it ignores essential outgoings, and looking at mortgage repayments alone misses other commitments like pension contributions. So, assessing affordability on the basis of the mortgage interest, plus pension contributions, best fits responsible lending principles.

Affordability checks under MCOB hinge on ongoing commitments a borrower must meet, not just gross income. Considering the mortgage interest payments along with regular pension contributions captures two fixed, non-discretionary outgoings that reduce the money available to service the loan. This approach reflects the borrower’s real capacity to keep up payments over time, especially if interest rates rise or circumstances change. Using all disposable income would overstate what’s realistically available because it ignores essential outgoings, and looking at mortgage repayments alone misses other commitments like pension contributions. So, assessing affordability on the basis of the mortgage interest, plus pension contributions, best fits responsible lending principles.