MRT2 · Mortgage Products and Post Completion
MRT2 LO6 starts with the two choices every mortgage involves: how the capital gets repaid and how the interest rate behaves. Expect short calculations (interest-only payments, a tracker after a Bank Rate change, a discount off the SVR, a capped or collared rate, total cost with fees or cashback, interest saved by an offset) and judgement calls on which method or rate type fits a customer. Most wrong answers come from confusing what a rate is linked to: a tracker follows Bank Rate, a discount follows the lender's SVR, and a fixed rate follows nothing until it ends.
10 min read7 sections
Checked against: Walbrook (formerly LIBF) CeMAP specification v14, MRT2 LO6 (AC6.1-6.2); FCA Handbook MCOB 11.6.2R, 11.6.4E, 11.6.14R, 11.6.15G, 11.6.41R, 11.6.46E, 12.3.1R, 4.7A.6R and Glossary (retirement interest-only mortgage); Bank of England Bank Rate; gov.uk savings tax 2026/27; checked 11 Oct 2026. Independent prep, not endorsed by Walbrook (formerly LIBF).
The specification (MRT2 AC6.1) names three methods: repayment, interest-only and interest-only into retirement. Part-and-part simply splits one loan between the first two. Work out each part separately and add them.
| Method | Monthly payment covers | Owed at end of term | Example: £100,000 at 5% over 25 years |
|---|---|---|---|
| Repayment (capital and interest) | Interest plus some capital | Nothing | £585 a month; £75,500 total interest |
| Interest-only | Interest only | The full £100,000 | £416.67 a month; £125,000 total interest |
| Part-and-part (£60,000 / £40,000) | Interest on all; capital on the repayment part | £40,000 | £351 + £166.67 = £517.67 |
| Retirement interest-only | Interest only, for life | Repaid on death or long-term care | £416.67 a month, no end date |
On a repayment loan at a constant rate the payment stays level, but its make-up changes: early payments are mostly interest, later ones mostly capital. In month one of £200,000 at 5% over 25 years, only £335.85 of the £1,169.18 payment reduces the debt.
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Trap: assuming an interest-only balance falls with time, or quoting total payments when the question asks for total interest.
Takeaway: Repayment clears the debt; interest-only leaves all of it. In part-and-part, only the interest-only slice is still owed at the end.
MCOB 11.6.41R lets a lender enter into an interest-only mortgage, or switch a repayment mortgage onto interest-only for all or part of the term, only if it has evidence that the customer will have a clearly understood and credible repayment strategy with the potential to repay the capital.
MCOB 11.6.46E lists strategies whose acceptance tends to show a breach:
Acceptable strategies are evidenced and funded, for example regular ISA or investment contributions projected to reach the loan amount. The cost of the strategy is part of the customer's monthly outlay: £240,000 at 4.5% is £900 interest, plus £300 into an ISA, so £1,200 a month in total.
Switching from repayment to interest-only is material to affordability (MCOB 11.6.4E), so the same-lender exemption in MCOB 11.6.3R does not apply.
Trap: accepting an inheritance because the relatives are wealthy or the LTV is low. Low LTV never turns a speculative plan into a credible one.
Takeaway: Evidence, not hope. Inheritance and price growth fail; downsizing passes only if there is enough equity left to rehouse the customer.
