Lenders

The role of a lender

Lenders lend money to borrowers in the form of a mortgage (or charge), to fund the purchase of a property. This is subject to:

The borrower’s affordability

The property meeting the Lender's lending policy

Lenders require the advice of other stakeholders in the process to establish the value of the property and ensure that the loan to value meets their requirements.

Following the implementation of the protocol, lenders will have the opportunity to collaborate with other stakeholders to ensure an efficient customer journey.

Rules and Regulations

The following rules and regulations apply to lenders

In the UK, lenders need to abide by the Financial Conduct Authority (FCA) code of conduct, in particular the Mortgages and Home Finance: Code of Business (MCOB), including the Consumer Duty to prevent foreseeable harm. Lenders are also subject to legally binding decisions of the Financial Ombudsman Service if the borrower complains.

The Consumer Protection from Unfair Trading Regulations 2008 (Consumer Protection Regulations, CPR) which is updated by the Digital Markets, Competition and Consumers Act 2024 identifies what information should be revealed to the borrower during the process.

Lenders must adhere to the Money Laundering Regulations 2017 and be aware of the Proceeds of Crime Act 2002, which is the main money laundering legislation covering offences in the UK.

Material Information

Material Information (MI) means the information relevant to the property which would impact the average consumer’s ability to make an informed transactional decision.

This covers the legal and physical aspects of the property, along with the affordability of the financial aspects.

This will include things like:

The size of the property
Any restrictions on the property
The tenure of the property (leasehold, freehold, commonhold)

Benefits and opportunities in collaborating to share data

There are many benefits to sharing data with lenders in the early stages and throughout the buying and selling process, these include:

Greater transparency

The borrower’s information allows lenders and providers to identify the borrower’s affordability and obtain a mortgage in principle. This helps the borrower only look at affordable properties, preventing time wasting.

Furthermore, the details provided can provide more assurance of successful lifetime mortgage application or port/move proposal.

For lenders, Material Information identifies whether the property meets their lending policy requirements.

Faster certainty

Upfront information allows mortgage applications for properties uncompliant with the lending policy to be rejected.

Relevant material data allows lenders to identify early whether they will lend on a property of that type.

Incorporating digital survey data and Material Information into the valuation will reduce post valuation queries.

Better outcomes

Greater protection against fraud and money laundering.

Less waste on declined applications and transactions falling through.

Improved consumer understanding allowing them to find the right lender product for them and the property.

More fulfilling job roles.

Improved conversion and completion rates for lenders.

What data does a lender need?

A Lender would benefit from a range of data to support their service, including:

• Anti Money Laundering verification
• Any outstanding credit and debt
• Bank statements
• Borrower credit score and credit references
• Borrower ID and any necessary visas
• Council tax
• Employment and self-employment details
• Energy Performance Certificate (EPC)
• Evidence of income
• Full property portfolio for Buy to Let transaction
• Property risk
• Property Type
• Size of property in m2
• Tenure

Glossary of terms

Data sources

A lender can obtain data from a variety of sources, including:

Asking the borrower for the data

Mortgage intermediary supplies data on application or decision in principle

Gathering information direct from relevant authority

Verifying* the Material Information in existing Property Logbook

Receiving verified* Material Information and borrower data, either directly or shared by others in the process

* Authenticating the origin of the data, allows the conveyancing lawyer to establish whether the information is verified by the relevant data authority.

Sharing more digital data

The increased sharing of digital data will have many positive impacts, including:

Digital ID certificates will speed up the verification under Anti-Money Laundering requirements for estate agents, conveyancing lawyers, mortgage intermediaries and lenders

The data in the property description, searches, title and seller information is also used by estate agents, surveyors, valuers, mortgage intermediaries, lenders and domestic energy assessors to provide their services

Current process

Process flow to Exchange of Contracts

Below are the key stages and activities in a property transactions related to the lender:

Decision in principle

Borrower ID
VISA if applicable,
Income, credit reference
AML due diligence

Pre-Viewing

Mortgage Decision in Principle
Proof of funds and Buyer ID
Review Material Information on affordable property

Mortgage decision in principle

Mortgage application
Contract pack
Valuation
Survey (where advised)
Due diligence
Enquiry of specifics relevant to the Buyer and their Lender