Paradigm Mortgage Services has called for mandatory regulated mortgage advice for all first-time buyers, arguing that the change would provide a targeted safeguard under Consumer Duty.
The distributor has published a discussion paper, entitled Mandatory Mortgage Advice for First-Time Buyers: A Proportionate Regulatory Evolution Under Consumer Duty, following recent FCA regulatory changes, including the removal of the long-standing mortgage advice interaction trigger as part of last year’s Mortgage Rule Review.
Paradigm said the combination of expanded execution-only mortgage routes, the removal of structural prompts to advice, and evidence of consumer vulnerability had created a regulatory inflection point for the mortgage market.
The paper argues that first-time buyers often display several vulnerability indicators, including limited experience with long-term financial products, lower financial resilience, high emotional investment in the home-buying process, and significant information asymmetry compared with lenders and advisers.
It also cites findings from the FCA’s Pure Protection Market Study, published in January, which found that 58% of UK adults do not hold any pure protection product and that 72% of identified protection needs remain unmet.
Paradigm said the home-buying process was one of the most appropriate points for consumers to consider protection, but warned that without advice many first-time buyers would receive no structured assessment of those needs.
The paper also warns that an execution-only mortgage process assumes consumers can independently identify and select suitable mortgage products, which Paradigm argues is inconsistent with FCA evidence on consumer understanding, particularly among borrowers buying their first home.
It said foreseeable harms within execution-only routes could include selecting unsuitable mortgage products, misunderstanding affordability risks in a volatile rate environment, failing to consider lender-specific criteria affecting future borrowing, and missing essential protection conversations.
The paper draws parallels with pension mis-selling issues and the subsequent introduction of mandatory advice requirements for defined benefit pension transfers, arguing that preventing harm is more effective than compensating for it after the event.
Paradigm is encouraging industry stakeholders to support the initiative by signing a public pledge and completing a short survey designed to gauge support for mandatory advice and build wider engagement around the issue.
Bob Hunt (pictured), chief executive officer at Paradigm Mortgage Services, said: “In a market where the stakes are so high, and where vulnerability can often be inherent, rather than incidental, mortgage advice for first-time buyers should not be optional.
“The convergence of the removal of the advice trigger, the expansion of execution-only pathways, and the FCA’s own findings around protection gaps, creates the need for a serious debate about whether the current framework continues to deliver consistently good outcomes for first-time buyers.
“This is not a radical intervention either as many mortgage market stakeholders already recognise the heightened risks faced by first-time buyers and insist on advice being taken, especially when it comes to high LTV borrowing.
“What we are proposing is a proportionate and targeted safeguard for a consumer group making one of the biggest and longest-term financial commitments of their lives.
“Advice should be viewed as a minimum standard of protection for first-time buyers; we have already garnered support from advisory firms, networks and lenders, and we would urge all those who also agree to read our paper and sign the pledge to strengthen the case for this outcome.”
The proposal has received support from the Association of Mortgage Intermediaries.
Stephanie Charman, chief executive at AMI, said: “AMI strongly supports the principle that advice is essential for first-time buyers. Purchasing a home for the first time is one of the most significant and complex financial decisions a consumer will ever make.
“First-time buyers face a unique combination of challenges including limited experience of long-term financial commitments, a knowledge gap around mortgage options and the home-buying process, and the emotional pressure of a high-stakes transaction.
“AMI believes that ensuring all first-time buyers access mortgage advice is essential to meeting the spirit and intent of Consumer Duty, closing the protection gap at a critical life stage and building the long-term financial resilience of this important consumer group. Advice is not a luxury for first-time buyers, it is a necessity.”
