Will new FCA regulation ruin the broker market? – Krampah-Williams

Specifically, the Financial Conduct Authority’s (FCA’s) proposals on reforms to mortgage execution-only sales found in Consultation Paper (CP) 25/11.

CP25/11 was designed to simplify mortgage rules and increase flexibility for borrowers. The proposals aim to make it easier and faster for consumers to remortgage or reduce their mortgage term by making changes to responsible lending and advice rules. The reforms also include retiring outdated guidance and encouraging innovation in the market, including through artificial intelligence (AI)-assisted tools.

The key proposals and changes include:

• Simplified rules

The changes simplify rules around responsible lending and mortgage advice to make it easier for borrowers to engage with their providers and make changes.

• Increased flexibility

Firms have more flexibility to tailor their communications and use innovation, including AI-assisted advice, to help consumers assess product eligibility.

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• Easier remortgaging

The rules are intended to make it easier and faster for consumers to remortgage with a new lender.

• Reduced costs

Some measures, such as reducing mortgage terms, are aimed at helping consumers reduce the overall cost of their borrowing.

• Retiring outdated guidance

The FCA retired two pieces of outdated guidance to better align with current market needs.

Uncertainty for brokers

This paper has caused some disquiet in the broker community over fears that lenders will seek out execution-only business as a priority. However, at Santander, we have been clear in our pledges that we will parity price across all our channels, and we’re clear too that customers need and benefit from the advice that brokers give.

It’s certainly not just about rate.

Our view is that customers need somebody they trust and can talk to, and that AI or execution-only is not going to be able to replace that. The mortgage broker’s role in being that trusted person is clear – they represent someone that the customer knows, who has a relationship with lenders, and who can use their experience and judgement in a way that technology will not be able to do. AI and technology do have a role for brokers in augmenting what they do, but it is not about replacing what they do.

The FCA paper suggests that we might see a shift with a few more customers exercising the option to use execution-only, but that feels more like a small adjustment and not a sea change.

The value of brokers

There is a clear understanding at Santander of the long-term consumer benefit of using a mortgage broker for advice, a shift that now sees nearly 90% of our completions from this key channel. We have been focused on dripping improvements into the market, so brokers know we are serious about helping them support more customers.

This focus saw us make significant changes to affordability and policy earlier this year. We were the first to respond to the guidance lenders received from the FCA in March on stress testing and reacted again when the Prudential Regulation Authority (PRA) advised on its loan-to-income (LTI) flow rate changes, which has given us the opportunity to lend more where affordability is proven.

We want mortgage brokers to know that they are central to our mortgage proposition. Our Broker Pledges that we launched back in February were our way of signposting that. The pledges were: not to dual price, to give a minimum of 24 hours’ notice on rate withdrawals, and to improve our product transfer (PT) proposition.

Brokers will remain our key focus as we go into 2026, and we are committed to improving our proposition further in order to help them better support their customers, even with potential regulatory change on the horizon.

What’s more, we are already thinking of how we evolve our pledges in 2026 to reinforce our partnership with the broker community to ensure that mortgage brokers remain front and centre of our focus.