Reporting of home equity loans on RRF 39Reporting of home equity loans on RRF 392.0 and RRF 394.0

Reporting of home equity loans on RRF 392.0 and RRF 394.0

• Attach one of two major (or primary) purposes to each home equity loan commitment- either "Housing" (for Owner-Occupation) or "Other" (than housing for owner-occupation).

• Primary purpose "Housing" commitments to be reported under Question 10 (Part

C) - secured revolving home loans - on RRF 392.0.

• Primary purpose "Other" commitments to be reported as secured personal revolving credit (Question 15) on RRF 394.0, with all drawdowns, re-payments and re-borrowing of principal in subsequent months to be reflected in the value of credit used (Question 17).

• Where it is not possible to isolate the credit used (Question 17) for RRF 394.0 on a sub-group of all home equity loan commitments, then some manipulation must be undertaken to ensure the reported value of credit used is conceptually consistent with the total value of used and unused credit (Question 16), and previously reported values of new revolving credit commitments on RRF 394.0.

The intention of the table which forms Question 1a-1e on RRF 392.0 is to monitor the total "stock" of all commitments not advanced. New commitments to lend are added to the stock while advances of commitments and cancellations are removed from the stock. With a fixed term amortising loan, the commitment is either advanced when the finance is settled, or the commitment lapses and is cancelled. Where only part of the initial commitment is advanced, then it may be necessary to report a value advanced and a value cancelled, so that the (previously reported) commitment is wholly removed from the stock of all commitments not advanced. Some lenders may not cancel lapsed commitments until many months after the commitment is made. We prefer that lapsed commitments are reported as cancellations as regularly as possible. Once a commitment is cancelled or advanced, it plays no further role in the table in Questions 1a-1e of RRF 392.0.

The treatment of home equity loan commitments in Questions 1a-1e is problematic. Given that a home equity loan commitment will be reported for RRF 392.0 only if its primary purpose is the purchase of owner-occupied housing, it is reasonable to assume that the majority of the commitment will be advanced in a comparable timeframe as for a regular standard variable loan commitment. As for all new commitments, the new home equity loan commitment should be added to the stock of undrawn commitments (Question 1b). Any amount advanced (for the purchase of owner-occupied housing) in the same or subsequent months should be reported as an advance (Question 1c); at the same time the balance of the commitment (if any) reported as a cancellation (Question 1d). The home equity loan commitment (like all housing finance commitments) will take no further part in reporting to RRF 392.0.