The proposed changes to mortgage proposals could put an intermediary fee of nearly £120 million, which the broker said increased the risk of more borrowers coming out with the wrong product.
The move comes from the Financial Conduct Authority, which said it hopes to make buying a home loan “easier, faster, and cheaper”.
Regulators’ Mortgage Rules Review: Consultation Document CP25/11 says the plan is to “simplify sectoral requirements in four key areas”.
These cover mortgage advice and affordability rules for periodic reduction and revocation of mortgages.
FCA must be aware of the unintended consequences of borrowers pursuing only routes that may not provide the best long-term solution
The FCA also plans to retire two non-manual rules on interest rate-only mortgage clients, which may not be able to repay their loans, and is hit by rising cost of living in order to support corporate guidance for existing mortgage lenders.
But, no surprise, it was the watchdog’s proposal surrounding the proposal that raised the broker’s concern while keeping the lender undisturbed.
The FCA said it hopes to make it easier for consumers to “interact with their mortgage providers without providing mortgage advice when they are not needed.”
Its main focus is product transfer, noting that 83% of the 1.6 million borrowers cashed in the same lender last year.
According to UK financial data, the product transfer market fell 7% in 2024 to £22.4 billion.
Regulators want to increase the use of only sales in the field to reduce borrowing costs.
The real risk not only affects how much, but whether to choose by fully understanding what they gave up
A 2019 study conducted by the supervisory agency found that its current rules “limit” complex consumer access to “execute options only more than expected.”
It added that lenders “had no confidence in dealing with clients outside the consulting process because they believe regulatory risks.”
It also noted that rules in the field “are limiting innovation, especially in the use of digital channels”.
The regulator has raised three situations where its broker fees may result.
Its highest case was that 7.5% of home loans sold by intermediaries (about 97,000 mortgages) resulted in a drop in procurement fees of £95.1 million and spending costs of £21.4 million, totaling up to £116.5 million in loss costs.
Its minimum case was a 1% home loan sold by a broker (about 13,000 mortgages), resulting in £127 million in procurement fees and a drop in consumer fees by £2.8 million for a total of £15.5 million.
BSA supports any changes that simplify the consumer process
The regulator said it would rely on lenders to use the “discretion” of borrowers who sell only the loan, adding that it “hopes” that lenders “encourage consumers to accept advice if they think it will bring good results”.
It added that its extensive excise tax rules proposed in 2023 “will help ensure consumers can make a smart choice of whether to trade without advice”.
“The FCA says it’s not mandatory, so companies won’t be forced to change their models overnight,” said Liz Syms, CEO of Connect Mortgages.
“But the reality is that once it removes regulatory barriers, it opens the door to a major shift in behavior, especially in digital channels.”
Syms added: “If lenders start excluding more consumers when executing, we can see a significant drop in recommended rates, especially for simpler situations or younger, digitally confident borrowers.
“That is, many clients do actually want to suggest, so the real risk not only affects how much, but also fully understand what they have given up to make a choice.”
If lenders start to lower more consumers only, we can see a significant drop in recommended rates
Paul Broadhead, head of mortgage and housing at the Institute of Architectural Society, said the agency “supports any change in simplifying the consumer process.”
He added: “Any interaction with lenders so far, even for simple personalized queries, requires going into a fully advised process. We believe that in most cases, advice is the most appropriate route to ensure that borrowers get the right deal for them.”
Charles Roe, UK financial director, said: “The new proposal allows lenders to consider only the process of execution to save informed clients time and enhance their accountability experience.
“However, it is important that the FCA pay attention to the potential unintended consequences of borrowers pursuing only pathways of execution, which may not provide the best long-term solution for their specific situation.”
FCA CEO Nikhil Rathi told the U.S. Treasury Selection Committee in March that its relaxed home loan rules involve “trades” that could reduce mortgage property from a relative low of around 1,000 per quarter.
Once the FCA removes regulatory barriers, it will open the door to a major shift in behavior, especially in digital channels.
Stephanie Charman, CEO of the Association of Mortgage Agency (AMI), said last month that the FCA’s recommendations “ignored the critical role of mortgage consultants.” She added that Ami is in conversation with members, regulators and other trade agencies to ensure “hearing the voice.”
The FCA consultation will end on June 4, with regulators planning to issue policy statements “quickly” in the third quarter without “implementation deadlines.”
The agent’s body does not have a long time to express his voice. There may be a new fee system before autumn.
This article is in the June 2025 edition Mortgage Strategy.
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