Under Treating Customers Fairly (TCF) Outcome 4, firms must be able to demonstrate that any mortgage recommendation is suitable for the customer’s individual needs and circumstances. It is not enough to simply recommend a product that appears appropriate at the time; advisers must also maintain clear records showing how and why the recommendation was reached.
A key part of this is evidencing that the customer can afford the mortgage for the full term of the loan, not just at the outset. Advisers should consider the customer’s income, expenditure, future commitments, and any foreseeable changes in circumstances that may affect affordability over time. This is particularly important where mortgages extend into retirement or involve higher levels of borrowing. Records should clearly show how affordability was assessed and any discussions held with the customer regarding future financial commitments or potential risks.
Firms must also be able to demonstrate that the recommended mortgage was suitable based on the customer’s needs, objectives, and attitude to risk. This includes considering factors such as the preferred mortgage term, repayment method, flexibility of the product, early repayment charges, and whether the customer prioritises payment stability, lower monthly repayments, or reducing the overall cost of borrowing. Advisers should ensure these discussions are properly documented within the factfind, research, and suitability letter.
In addition, firms should be able to evidence why the recommended product was considered the most suitable from the available options researched. This does not necessarily mean the cheapest product must always be recommended, but there should be a clear rationale explaining why the chosen mortgage best met the customer’s overall needs and circumstances. Where alternative products were discounted, the reasons should also be recorded on file.
Good record keeping is essential. File notes, affordability assessments, sourcing evidence, and suitability reports should all work together to demonstrate the rationale behind the advice given. This not only helps firms evidence compliance with TCF and Consumer Duty requirements but also provides important protection should the suitability of the recommendation ever be questioned in the future.
