Proposed changes to mortgage advice could cut intermediary fees by almost £120m, which brokers say raises the risk of more borrowers taking out the wrong products.

The move comes from the Financial Conduct Authority, which says it wants to make buying home loans “easier, faster and cheaper”.

The regulator’s Mortgage Rule Review: Consultation Paper CP25/11 says it plans to “simplify sectoral requirements” around four key areas.

These cover mortgage advice as well as affordability rules for mortgage term reductions and remortgaging.

The FCA must be mindful of unintended consequences of borrowers pursuing an execution-only route that may not deliver the best long-term solution

The FCA also plans to retire two non-handbook rules on interest-only mortgage customers at risk of being unable to repay their loans, and guidance for firms supporting existing mortgage borrowers hit by rising living costs.

But, not surprisingly, it is the watchdog’s proposals around advice that have raised concerns among brokers, while leaving lenders unperturbed.

The FCA says it wants to make it easier for consumers to “engage with their mortgage provider without the firm having to provide mortgage advice when not needed”.

Its main concern is product transfers, where it points out that 83% of the 1.6 million borrowers who remortgaged last year remained with the same lender.

The product transfer market fell by 7% to £224bn in 2024, according to UK Finance data.

The regulator wants to increase the use of execution-only sales in this area to lower borrowing costs.

The real risk isn’t just how many this could affect but whether they’re making that choice with full understanding of what they’re giving up

A study conducted by the watchdog in 2019 found that its current rules were “limiting” sophisticated consumers’ access to “execution-only options more than intended”.

It added that lenders were not confident “in dealing with customers outside an advised process due to perceived regulatory risk”.

It also pointed out that its rules in this area “were constraining innovation, particularly in the use of digital channels”.

The regulator has laid out three scenarios that its broker fee changes may lead to.

Its highest case is a 7.5% fall in home loans sold by intermediaries — around 97,000 mortgages — leading to a £95.1m fall in procuration fees and a £21.4m drop in consumer charges, adding up to £116.5m in lost fees.

Its lowest case is a 1% fall in home loans sold by brokers — around 13,000 mortgages — leading to a £12.7m fall in procuration fees and a £2.8m drop in consumer charges, totalling £15.5m in lost fees.

The BSA is supportive of any changes that simplify the process for consumers

The watchdog said it would rely on lenders to use their “discretion” on which borrowers they sold execution-only loans to, adding that it “expects” lenders to “encourage consumers to take advice where they consider this will deliver good outcomes”.

It added that its wide-ranging Consumer Duty rules, introduced in 2023, “would help ensure that consumers can make an informed choice on whether to transact without advice”.

Connect Mortgages chief executive Liz Syms points out: “The FCA has stated this is not mandatory, so firms won’t be forced to change their models overnight.

“But the reality is, once it removes the regulatory barrier, it opens the door for a significant shift in behaviour, especially among digital channels.”

Syms adds: “If lenders start routing more consumers down execution-only, we could see advice rates drop significantly, particularly for simpler cases or among younger, digitally confident borrowers.

“That said, many customers do actually want advice, so the real risk isn’t just how many this could affect but whether they’re making that choice with full understanding of what they’re giving up.”

If lenders start routing more consumers down execution-only, we could see advice rates drop significantly

Building Societies Association head of mortgages and housing Paul Broadhead says the body “is supportive of any changes that simplify the process for consumers”.

He adds: “Up to now, any interaction with a lender, even for simple personalised enquiries, has required entering a fully advised process. We believe that, in the majority of cases, advice is the most appropriate route, ensuring that a borrower gets the right deal for them.”

UK Finance director of mortgages Charles Roe says: “The new proposals allow lenders to consider where execution-only processes could save an informed customer time and enhance their remortgaging experience.

“However, it is important that the FCA is mindful of the potential unintended consequences of borrowers pursuing an execution-only route that may not deliver the best long-term solution for their specific circumstances.”

FCA chief executive Nikhil Rathi told the Treasury select committee in March that the basket of home loan rules it was relaxing involved “trade-offs”, which could see mortgage possessions rise from their relative low of around 1,000 a quarter.

Once the FCA removes the regulatory barrier, it opens the door for a significant shift in behaviour, especially among digital channels

Association of Mortgage Intermediaries (Ami) chief executive Stephanie Charman said last month that the FCA’s proposals “overlook the critical role of mortgage advisers”. She added that Ami was in talks with members, the regulator and other trade bodies to ensure “its voice is heard”.

The FCA’s consultation closed on 4 June, with the watchdog planning to “quickly” issue a policy statement in the third quarter without an “implementation period”.

Broker bodies do not have long to make their own voices heard. A new fee regime may be in place before the autumn.