Under MCOB rules, which component may be used in an affordability assessment?

Under MCOB rules, which component may be used in an affordability assessment?

• A. Only mortgage interest
• B. Mortgage interest plus pension contributions
• C. All discretionary expenses
• D. No affordability assessment is required

Answer: (B)

Affordability checks focus on regular, unavoidable commitments rather than optional spending. Under MCOB, lenders assess what a borrower must pay each month, so including ongoing outgoings that are contracts or commitments helps reflect true capacity. Mortgage interest represents the basic ongoing cost of the loan, and pension contributions are a regular, non-discretionary commitment many borrowers make for the future, so both are appropriate to include in the calculation. Discretionary expenses are variable and not guaranteed, so they aren’t reliable for determining affordability. There is a requirement to perform an affordability assessment, so saying none is not correct.

Affordability checks focus on regular, unavoidable commitments rather than optional spending. Under MCOB, lenders assess what a borrower must pay each month, so including ongoing outgoings that are contracts or commitments helps reflect true capacity. Mortgage interest represents the basic ongoing cost of the loan, and pension contributions are a regular, non-discretionary commitment many borrowers make for the future, so both are appropriate to include in the calculation. Discretionary expenses are variable and not guaranteed, so they aren’t reliable for determining affordability. There is a requirement to perform an affordability assessment, so saying none is not correct.