Occasional Paper No. 34: Effects of the advice requirement and intermediation in the UK mortgage market

As part of the mortgages market study, the FCA wanted to understand how receiving advice, and choosing to buy direct or through an intermediary affect consumer outcomes.

Occasional Paper No. 34 (PDF)


UK consumers searching and applying for a mortgage face a complicated choice. They have many products to choose from, involving multiple eligibility criteria, features and price elements. The stakes are high too: mortgages are most households’ largest financial liability. Finding a well-priced product with the right features can therefore make a big difference to household finances. To help navigate this complex landscape, consumers have access to (regulated) mortgage advice and the services of intermediaries who can compare products from different lenders. 

The 2014 FCA Mortgage Market Review (MMR) introduced a new advice requirement: regulated mortgage advice should be provided with every 'interactive' mortgage sale, whether conducted by a lender directly or an intermediary. Following this policy change, the proportion of advised mortgage sales to new customers increased from around 75% before to over 98% in the post-MMR market. Consumers also increasingly turned to intermediaries instead of approaching a lender directly (with the share of intermediated sales to new customers rising from 50% to 67%). 

This paper uses the introduction of the MMR to investigate the effect of the current advice requirement and the effect of intermediation (compared to a direct sale by the lender) in the post-MMR market: We measure outcomes in terms of product features and borrowing cost (the ‘price’ aspect of the mortgage).

We find the following average impact of the advice requirement on consumers that did not receive advice before the MMR:

  • substantially increased likelihood of using an intermediary
  • increased popularity of short-term (2-year) fixed rate products
  • small and ambiguous effects on borrowing costs

We also estimate the following effects of intermediation on consumers receiving advice after the MMR:

  • increased popularity of short-term (2-year) fixed rate products
  • increase in mortgage term to maturity (20 months longer)
  • lower near-term borrowing costs (£48 reduction in monthly payment during deal period, 1-19 basis points reduction on a 5-year APR basis)


Zanna Iscenko and Jeroen Nieboer.

Zanna Iscenko works at the FCA and is a PhD candidate at University College London.

Jeroen Nieboer works at the FCA and is a visiting fellow at the London School of Economics and Political Science.


Occasional Papers contribute to the work of the FCA by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence that the FCA may use while discharging its functions and to inform its views. The FCA endeavours to ensure that research outputs are correct, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that Occasional Papers contain any errors or omissions, they should be attributed to the individual authors, rather than to the FCA.

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28/01/2021: Information changed Link removed from summary.