Brokers’ dominant hold on the UK mortgage market is under serious threat from rapid advances in artificial intelligence and proposed regulatory changes, according to senior industry figures.
Advisers currently account for nearly 90% of new mortgage sales, according to Intermediary Mortgage Lenders Association data.
But participants in a roundtable on the future of the mortgage market, hosted by communications consultancy MRM, warned that brokers must evolve or risk being overtaken by digital alternatives.
Rob Jupp, group chief executive officer of Brightstar Group, said big banks are investing heavily in AI to recapture lost market share.
“Now branches don’t really exist anymore, it’s made the whole virtual marketplace acceptable to customers, which is where AI can play a huge role. I do worry that some brokers make assumptions that every year enough deals will fall into their lap,” he said. “They will need to offer real value to people for their commission and to change their proposition because AI will be better at taking on the simple tasks of securing people a good deal.”
The warning comes as the Financial Conduct Authority (FCA) consults on rule changes that would make it easier for borrowers to transact directly with lenders on an execution-only basis.
The proposals, outlined in CP25/11, include removing the “interaction trigger” introduced by the Mortgage Market Review, which currently requires full advice if there is interactive dialogue during a sale.
The FCA acknowledges the reform could lead some borrowers to bypass brokers. It has modelled a potential 7.5% drop in broker-handled transactions, equating to more than 97,000 fewer cases and over £116m in lost commission and fees annually.
Tanya Elmaz, director of intermediary sales at Together, said: “Brokers need to understand the headwind that’s coming and adapt. When I go to a mortgage advisor now, I want advice on retirement and my will and everything else.
“I want more than just a broker picking up the phone and saying my current deal is coming to an end.
“Younger people are also far more used to doing everything on their phone or on an app in just a few clicks, so brokers will have to watch their back with technology and adapt to supporting customers in different ways.”
John Davison, head of product, proposition and distribution at Perenna, said that the current model of “order taking” is unsustainable.
“We’ve seen some brokerage firms come to the market in the last few years where their advice process is not much more than order taking. The customer picks a product themselves online, and then the advisor affirms they’ve made the right choice,” he said. “Unless advisors fully assess customer needs, circumstances, and future plans, it can be easy to recommend a product that may not be suitable in the longer term because the customer is focused on cost rather than risk.”
Davison emphasised the value of personalised advice, especially in an increasingly automated market.
“Technology and AI is catching up quickly in the product transfer process, where lenders are now able to reach out to customers directly, offer them a near instant process for accepting a rate available, and all without advice. Brokers will be left behind in this part of the market unless they are able to offer their customers more value than just a new product,” he said. “The brokers who use AI and technology as part of the ongoing holistic advice process will thrive in this new future. Those who look to use it to just remove humans from the advice process may find they end up left behind.”
