Mortgage advice: brokers, advisers and applying direct

Most mortgages in the UK are regulated by the Financial Conduct Authority (FCA), which regulates most mortgages taken out on or after 31 October 2004¹. That regulation covers not just lenders but the people who sit between you and the lender: mortgage brokers and advisers. When you take out a mortgage you can apply direct to a lender, or you can go through a broker, and independent guidance notes that some deals are only available through brokers².

A broker's job is to search the market for mortgages that fit your circumstances, tell you what each one costs, and handle the application. Some firms state their advisers search over 100 lenders³. That is the core of the service, and it is also the limit of it: a broker finds and arranges, and the mortgage itself always comes from a lender. This page explains the routes to a mortgage, how brokers are paid, where their commission shows up in the paperwork, who tends to use a broker, and what to do if a broker gives bad advice or turns out not to be genuine.

What a mortgage broker does for you

A mortgage broker, also called a mortgage intermediary or adviser, arranges mortgages between you and a lender. The broker does not lend the money. Its work is to gather your financial details, search the deals it can access, recommend one (or present a selection), and then manage the application through to offer. Independent guidance on interest-only mortgages puts the choice plainly: you can apply direct through a lender or through a mortgage broker, and some deals are only available through brokers².

The practical value of that search depends on how wide it is. A single bank can only offer its own mortgages. A broker that searches over 100 lenders, as Mortgage Advice Bureau states its experts do³, can compare across banks, building societies and specialist lenders at once. For someone whose circumstances are straightforward, the difference may be small. For someone whose income is irregular, whose credit history has blips, or whose property is unusual, the difference can be whether a mortgage is available at all, because lenders' criteria vary widely and some lenders only accept applications through brokers. The dedicated page on broker-only lenders covers that last point in detail.

A broker also carries duties that a lender dealing with you direct does not owe in the same way. Under the FCA's mortgage rules, a mortgage intermediary must take reasonable steps to ensure that any illustration it issues, other than one provided by the mortgage lender, is accurate⁷. A firm must not issue an illustration for a mortgage the customer is clearly ineligible for on the basis of the information the firm has obtained⁸. In other words, a regulated broker is not simply a form-filling service: it is on the hook for the accuracy of what it tells you.

It is worth being clear about what a broker is not. A broker is not a surveyor, a solicitor or a valuer. The lender will still instruct a valuer to check the property acts as viable security for the loan, and the borrower generally pays for that basic valuation as part of the application⁹. The broker's role ends at the mortgage itself, though many also arrange the related insurance, which is a separate decision. The page on mortgage valuations and surveys explains what the valuation covers and what it does not.

Broker, adviser or applying direct: how each route works

There are three broad routes to a mortgage, and they differ in who does the searching and who carries responsibility for the choice.

Applying direct. You go to a lender, usually your own bank or a building society, and apply for one of its mortgages. The lender's staff can tell you about its own products. The search is narrow, but the process can be simpler and there is no broker fee. The process of obtaining a mortgage this way is still regulated by the FCA¹⁰.

Using a broker or adviser. You give your details to a broker, which searches the lenders it can access and recommends a mortgage. Some firms search over 100 lenders³. The recommendation is a regulated activity: the broker must match the mortgage to your circumstances and stands behind the accuracy of the illustration it issues⁷. Brokers differ in range: some cover the whole market, some cover a panel of lenders, and some are tied to a single lender or group. Ask any broker which of these it is before you start.

Execution only. You choose the mortgage yourself, without a recommendation, and the firm simply processes the application. Because no advice is given, the responsibility for the choice sits with you rather than the firm. This route is used most often for straightforward product switches, and it is the reason the question "do I need a mortgage broker?" has no single answer: the more standard your circumstances and the more confident you are comparing deals, the more an execution-only route can save in fees, and the more unusual your circumstances, the more a recommendation is worth.

The route you take does not change the mortgage itself. A fixed rate, a tracker or a standard variable rate works the same way however you apply, and the pages on fixed rate, tracker and standard variable rate mortgages explain each. What the route changes is the search, the cost and where the responsibility lies if the mortgage turns out to be wrong for you.

How brokers are paid: commission from the lender, fees from you

Brokers are paid in two main ways: commission from the lender, and fees from you. Many firms use a mix of both, and the balance differs from broker to broker, so the honest answer to "what does a broker cost?" is that you have to ask each one.

Commission is paid by the lender, usually when the mortgage completes. It does not come out of your mortgage balance directly, but it is a real cost of distribution that lenders build into their pricing. Because the lender pays it, a broker that charges you nothing is still being paid for arranging your mortgage, and that is worth knowing when you weigh how independent a recommendation is. The same principle applies in the wider intermediary market: brokers in adjacent markets such as insurance are paid by commission, and their professional opinion can be valuable where needs are complicated¹¹. A broker paid commission by many lenders has an incentive to place your mortgage somewhere, and a broker paid a flat fee by you has an incentive to place it anywhere, so the fee structure tells you something about where the incentives sit.

Fees charged to you vary. Some brokers charge nothing, some charge a flat fee, some charge a percentage of the loan, and some charge only on completion. There are also rules protecting you if the mortgage falls through: the rules on credit broking say that if a customer does not take out the loan, the broker should only keep a small amount of the fee¹². So an upfront fee is not automatically lost money if the application fails, but the amount the broker may retain is limited.

Two things to establish with any broker before you go ahead:

• How much is the fee, when is it payable, and is any of it refundable if the mortgage does not complete? The credit broking rules limit what can be kept if the loan is not taken out¹².
• Is the broker whole of market, a panel, or tied? This determines which lenders it can search, and therefore which deals you will ever see².

The page on mortgage fees and charges covers the costs charged by lenders themselves, from arrangement fees to valuation fees, which sit alongside any broker fee in the total cost of moving.

Where commission shows up: the mortgage illustration

Whatever route you take, and whoever pays the broker, the numbers have to appear in a standard document: the mortgage illustration. Under the FCA's rules, a firm must provide you with an illustration for a regulated mortgage contract before you submit an application for that mortgage to a lender, unless an illustration has already been provided⁴. All firms selling mortgages are required to give illustrations containing similar information⁸.

The illustration is where the broker's involvement becomes visible on paper. The standard format includes a section on using a mortgage intermediary, and the FCA's rules state this section is required only when the illustration is provided to you by, or on behalf of, a mortgage intermediary; if the illustration comes direct from the lender, the section is removed⁸. The same pattern applies in later-life lending: the section on using an intermediary in a lifetime mortgage illustration is required only where the illustration is provided by or on behalf of an equity release intermediary¹³. So if your illustration has an intermediary section, a broker stands between you and the lender, and that section is where its fee and the lender's commission are set out.

Two further rules protect the accuracy of what you are shown. A mortgage intermediary must take reasonable steps to ensure that an illustration it issues, other than one provided by the lender, is accurate⁷. And if the terms of the proposed mortgage are materially altered after you have been given an illustration, the firm must ensure you are provided with a revised illustration before acting on the amendment when the change occurs at the point at which you submit an application⁴. A firm must also not issue an illustration for a mortgage you are clearly ineligible for⁸. The page on the ESIS illustration goes through what the document must show section by section.

Who uses a broker: first-time buyers, movers and remortgagers

Brokers are used at every stage of the mortgage cycle, but for different reasons.

First-time buyers tend to use brokers because the process is unfamiliar and the criteria are opaque. A first purchase usually means a small deposit and a high loan to value, where the range of lenders willing to lend narrows sharply and criteria differ most. Bank of England statistics on lending to individuals record house purchase approvals as including lending to first-time purchasers¹⁴, and the search a broker performs across lenders is often widest exactly where criteria are tightest. The page on first-time buyer mortgages covers what is different about a first purchase.

Movers face a different calculation. Bank of England statistics include existing borrowers transferring their existing mortgage to another property within house purchase approvals¹⁴, and a mover with equity and a clean payment record has more options than a first-time buyer, which can make a direct application more workable. But movers also face timing pressure, chains and deadlines, which is where a broker managing the application can help. The page on porting a mortgage explains the alternative of taking your existing mortgage with you.

Remortgagers are defined by the Bank of England as existing borrowers who redeem their current mortgage in favour of a new one secured on the same property, but with a different mortgage lender¹⁴. That definition matters, because it excludes the large number of people who stay with their existing lender on a new deal, which is covered in the next section. A remortgage to a new lender is a fresh application with fresh checks, and a broker can search the market for the replacement deal. The pages on remortgaging and remortgage or product transfer compare the two routes.

Circumstances, more than life stage, decide the answer. Where income is complex, credit history is damaged, the property is unusual or the borrowing is specialist, the number of lenders able to help shrinks, and knowing which ones they are is precisely what a broker sells. The pages on self-employed mortgages, bad credit and specialist lenders cover those situations.

Staying with your current lender: the Mortgage Charter rules

Not every mortgage decision needs a broker or a full application. The Mortgage Charter sets standards that lenders adopt when helping their regulated residential mortgage borrowers who are worried about higher rates¹⁵. Under the Charter, customers who are up to date with payments can switch to a new mortgage deal with their lender at the end of their existing fixed-rate agreement without a new affordability check¹⁶. The Charter also provides that its one-off options can be taken by customers who are up to date with their payments without a new affordability check or affecting their credit score¹⁵.

This is the closest thing to a guaranteed no-advice route in the market: if you are simply moving from a fixed rate that is ending to your lender's next deal, and you are up to date, the switch does not depend on a broker or a fresh assessment. The page on product transfers explains how these switches work in practice.

The limits are just as important. Affordability will need to be checked if you wish to permanently convert to an interest-only mortgage, or where the mortgage term is proposed to be extended beyond your expected retirement date¹⁵. Separately, FCA rules introduced two limited exemptions allowing lenders to vary a mortgage contract to temporarily reduce capital payments, including to zero and paying interest-only, for up to 6 months, and to reverse a term extension within 6 months of it taking effect, without assessing affordability; these apply once per contract and not to second charge or bridging loan contracts¹⁷. So the no-check route covers staying put on a new rate; it does not cover changing the shape of the mortgage, and anything beyond it brings affordability back into play.

Two further points for particular borrowers. If you are behind with payments rather than up to date, different rules apply: a lender may arrange a forbearance agreement allowing you to repay missed payments¹⁸, and the pages on mortgage arrears and the Mortgage Charter cover that ground. And if you have a shared equity scheme such as Help to Buy Wales, remortgaging without increasing borrowing still involves the scheme administrator: the new lender must confirm it will not allow additional borrowing without prior consent¹⁹.

Checking a broker is genuine on the FCA register

Before you give a broker any money or personal information, check it exists. The Financial Ombudsman Service's guidance on credit broking is blunt about this: make sure the broker you use is on the FCA's Financial Services Register, which means they are authorised and regulated¹². You can check whether a provider or adviser is authorised on the FCA register²⁰, and the FCA also publishes contact details for regulated financial businesses⁵.

The FCA's Firm Checker is the practical tool. MoneyHelper's guidance on scams says to check you are using a legitimate loan provider by searching the FCA Firm Checker and using the contact details listed there, not the ones given to you²¹. The ombudsman gives the same advice: use the FCA's Firm Checker to confirm the firm is authorised and help avoid scams²². The FCA's own guidance adds a step that catches most impersonation attempts: check that the contact details match those listed on Firm Checker, because scammers pretend to be a real firm²³. For a lender, the FCA describes the search concretely: search the firm by name, select borrowing money including credit card lending and credit information, and check the firm is authorised with permission to lend you money on an unsecured basis²⁴. For a mortgage broker, the equivalent check is the firm's entry on the Financial Services Register, which you can also do by phone on the FCA's consumer helpline, 0800 111 6768⁶.

Loan fee fraud is the classic scam in this market: a fake broker or lender asks for an upfront fee for a mortgage or loan that never arrives. The protections against it are simple habits rather than compensation schemes, which is why the checking step matters more here than anywhere else on this page. The scams and fraud guide covers the wider warning signs, and the FCA's ScamSmart service lets you check whether an investment provider is genuine²⁵.

Complaints about a broker: eight weeks, then the Financial Ombudsman Service

If a broker has given bad advice, charged a fee it should not have, or mishandled an application, the complaint route is fixed and free. The first step is to complain to the broker itself. The ombudsman's guidance on mortgage complaints says you first complain to your lender or mortgage intermediary, which should look into things and reply within eight weeks; if you are not satisfied with the response, or do not get one within eight weeks, you can bring the complaint to the ombudsman²⁶. The same eight-week rule appears across the ombudsman's guidance: if the firm does not send a final response letter within eight weeks, or you are unhappy with its response, you can bring the complaint to the ombudsman²⁷. For complaints about financial difficulties affecting your ability to repay your mortgage, the ombudsman can look at the complaint after the firm has replied or after eight weeks without a reply²⁸.

For credit broking complaints specifically, the ombudsman describes a tighter timetable: the firm must get back to you within 15 days, either with a response or to explain why it cannot yet give one, and send a final response within 35 days, after which you can bring the complaint to the ombudsman²⁹. Which timetable applies depends on the nature of your complaint, so it is worth quoting both when you chase a firm.

Once the ombudsman route is open, there is a deadline of your own to watch: you need to make the complaint to the ombudsman within 6 months from the date on the firm's final response⁵. The ombudsman's service is free, and its decisions on mortgage complaints, including complaints about the interest rates applied to mortgages²⁶, bind the firm if you accept them. The page on complaining to the Financial Ombudsman about your mortgage walks through the process in more detail, and the page on mortgage rules and your rights sets out the wider protections that come with a regulated mortgage.