Mortgage brokers face a growing threat to their market dominance as major lenders prepare to invest heavily in artificial intelligence and the Financial Conduct Authority pushes forward with proposals that could make it easier for consumers to bypass advice and deal directly with lenders.

At a recent industry roundtable, senior figures warned that brokers’ long-standing grip on the market is at risk, with the dual forces of regulation and technological advancement converging to disrupt the status quo.

The discussion, hosted by financial services consultancy MRM and titled The Mortgage Market in 2035, featured a stark assessment from Brightstar Group chief executive Rob Jupp, who said major lenders are “getting ready to wage war” by ploughing millions into AI technology in a bid to win back 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,” Jupp said. “I do worry that some brokers make assumptions that every year enough deals will fall into their lap. 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.”

Brokers currently arrange close to 90% of new mortgage sales, according to data from the Intermediary Mortgage Lenders Association, and have enjoyed a dominant position in the market for more than a decade. But this could soon be under threat.

FCA PROPOSALS

The FCA is currently consulting on changes that would dismantle parts of the Mortgage Market Review’s safeguards around advice. Under the proposals, set out in consultation paper CP25/11, the regulator suggests removing the “interaction trigger” that requires lenders to provide advice if there is meaningful dialogue with a customer. The aim is to make it easier for borrowers to use execution-only services when arranging mortgages.

While the FCA concedes there is uncertainty over the likely impact, it has modelled a 7.5% fall in advised sales. This would translate to over 97,000 fewer broker-handled cases annually and more than £116m in lost fees and commission for the sector.

Tanya Elmaz, director of intermediary sales at Together, said brokers must prepare for change. “When I go to a mortgage adviser now, I want advice on retirement and my will and everything else,” she said. “It’s not even a very long conversation with regards to new information and not much of a value-add scenario that consumers need. People are also not necessarily just looking for the fixed rate… Younger people are 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.”

John Davison, head of product, proposition and distribution at long-term fixed rate lender Perenna, warned that the role of brokers risks being reduced to little more than rubber-stamping customer choices.

“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,” he said. “Unless advisers 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.”

Davison argued that the true value of mortgage advice lies in delivering recommendations based on a client’s wider financial goals, not simply offering the cheapest deal. He acknowledged that lenders are increasingly using AI to streamline product transfers directly with borrowers, without advice, and warned that brokers risk being sidelined unless they can demonstrate clear added value.

He said: “Technology and AI is catching up quickly in the product transfer process… 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. The danger here is that customers accept the new, quick and easy process from their lender without receiving any advice – and this is where brokers have an opportunity to ensure they remain relevant in a world of digital automation.”

Despite the warnings, Davison expressed optimism about the future role of advisers, provided they adapt to new expectations and tools. “It’s hugely important that we don’t underestimate the role advisers play in financial education in this country,” he said. “The brokers who use AI and technology as part of the ongoing holistic advice process will thrive in this new future.”