Kim cannot afford a mortgage alone. Her retired father offers a guarantee, but the lender's assessment shows that after his own commitments his pension could not cover the payments. The lender approves the loan anyway because 'the guarantee is there'. Is this compliant?
MCOB 11.6.2R requires the lender to assess whether the customer and any guarantor can pay the sums due, and not to proceed unless it can demonstrate affordability. MCOB 11.6.5R(1) bars basing affordability on equity in a property, so his home's value does not fill the gap. There is no rule banning retired guarantors; the issue is that the assessment failed.
Treating a guarantee or the guarantor's property equity as a substitute for affordability.
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