MCOB suitability: seven things mortgage advisers get wrong

MCOB 4.7A is specific about suitability. A regulated mortgage recommendation must be appropriate to the customer's needs and circumstances, and the firm has to record the reasoning that shows why (MCOB 4.7A.2R and 4.7A.25R). Most advisers understand this in principle. The gap almost always appears in the file, not the advice.

That distinction matters. In case reviews across networks and lenders, the recommendation is usually sound. What is missing is the written evidence that it was sound. When a supervisor, or the FCA, later reads the file, good advice with no recorded reasoning looks identical to poor advice. The Consumer Duty has sharpened this further, since evidencing good outcomes is now an explicit obligation rather than a courtesy.

Seven errors come up again and again. Here they are at a glance.

1. Product features recorded instead of the reason why
2. No explanation of why the recommendation is not the cheapest
3. Interest-only with no credible repayment strategy
4. A term running past retirement, unjustified
5. Debt consolidation without weighing the true cost
6. Affordability built on today's income alone
7. Vulnerability noted in the room but not in the file

The most common failure is a suitability report that describes the mortgage rather than justifying it. It lists the rate, the term, and the product features, then stops. What it does not say is why those features are right for this customer's needs and circumstances, which is exactly what MCOB 4.7A.5R asks for.

The fix is a habit, not a template. For every material feature of the recommendation, the file should answer a single question: why this, for this client. A two-year fix is not suitable because it is a two-year fix; it is suitable because the customer expects to move within that window. Record the link between the customer's stated need and the product chosen, and the reason-why writes itself.

The outcome that matters: the file shows the thinking, not just the product.

Where the recommended contract is not the cheapest suitable option available, MCOB 4.7A.23AR requires the firm to explain why. This is one of the most frequently missed requirements, because advisers often have a perfectly good reason and simply do not write it down.

A cheaper product might carry an early repayment charge that does not fit the customer's plans, or lack a feature such as portability that they need. Those are legitimate grounds. The error is leaving them in the adviser's head. If the file recommends anything other than the lowest-cost appropriate option, it must state, in plain terms, the customer-specific reason that justifies the extra cost.

The outcome that matters: cost is defended on the customer's terms, in writing.

When interest-only is recommended, MCOB 4.7A.9R requires the firm to ensure the customer understands they need a credible strategy to repay the capital. Files often note the repayment vehicle in a single line, or assume future downsizing without testing whether it is realistic.

A credible strategy is evidenced, not asserted. If it is an investment or pension, the file should show the expected value and the assumptions behind it. If it is sale of the property, it should record that the customer can plausibly downsize and still meet their housing needs. Interest-only is one of the scenarios most likely to be pulled in a review, so the evidence has to be there before anyone asks.

The outcome that matters: the repayment plan survives scrutiny, not just the sale.

Where a mortgage term extends beyond the customer's expected retirement, or into later life, MCOB 4.7A requires the adviser to justify it and weigh the effects, including on means-tested benefits and tax for lending into retirement (MCOB 4.7A.6R and 4.7A.10AR). The recurring error is a term set to hit an affordability number, with no note of what happens when earned income stops.

The file should show the customer's intended retirement date, the expected income in retirement, and why the term remains suitable against it. Where the term deliberately runs long, that is a decision to record and defend, not a default to reach for. This is also a common vulnerability trigger, since later-life borrowing often coincides with health and capacity considerations.

The outcome that matters: the term is a justified choice, not an affordability workaround.

Debt consolidation looks like it lowers monthly outgoings, but securing previously unsecured debt over a longer term can raise the total cost and put the home at risk. MCOB 4.7A.15R requires the firm to weigh these effects, including the cost of extending the term and whether alternatives exist.

The file should compare the cost of consolidating against leaving the debts in place, note that unsecured debt is becoming secured, and record why consolidation is still in the customer's interest. A recommendation that only shows the lower monthly payment, with none of the trade-off, is the classic consolidation file failure and a predictable Consumer Duty concern.

The outcome that matters: the customer's total cost, not just the monthly figure, is on the record.

Affordability is not only a lender's calculation; it feeds suitability. A frequent error is an assessment that uses current income while ignoring a change the customer has clearly stated, such as a planned move to part-time work, parental leave, or retirement within the term. MCOB 4.7A.8G points advisers to consider such future changes.

Where the customer has flagged a foreseeable change in income or expenditure, the file should show it was considered and how it affects the recommendation. Ignoring a stated future change is both a suitability gap and, under the Consumer Duty, a foreseeable-harm problem. The point is not to predict the future; it is to evidence that the known facts were taken into account.

The outcome that matters: the recommendation holds up against what the customer already told you.

Advisers regularly pick up signs of vulnerability in conversation, a bereavement, a health condition, financial pressure, and then never capture it in the written record. When the file is reviewed, there is no evidence the vulnerability was identified or that the advice responded to it. The FCA's guidance on the fair treatment of vulnerable customers, reinforced by the Consumer Duty, expects both.

Two habits close this gap. Record the indicator when it surfaces, in the customer's own terms where possible, and record how the recommendation took it into account. If a customer's circumstances changed the advice, the file should show the compliance implications were considered. A vulnerability that exists only in the adviser's memory cannot protect the customer or the firm.

The outcome that matters: the file proves vulnerability was seen and acted on.

The reason these seven persist is the review model. Most firms still check a sample, often around one in five cases a month. Sampling catches individual mistakes late and misses patterns entirely: an adviser who consistently under-records reason-why looks clean in a five-file sample and only shows up once you have read enough of their cases.

The shift that works is from sampling to full review, with the checks applied to every case as it is packaged rather than months later. That is what we built Curvestone to do: read every file against the specific MCOB requirement, surface the exact gap, and map each flag to the rule it relates to, so a compliance team sees suitability issues while they can still be fixed. We have written more on AI in mortgage compliance and on evidencing good outcomes under the Consumer Duty.

If your file reviews still run on a monthly sample, these seven errors are almost certainly sitting in the cases you did not open.