Borrowers taking advice from brokers who work with a limited range of lenders can end up paying an extra £400 a year for their home loans, the FCA has revealed.
The findings come as part of the FCA’s interim report into mortgage market competition, in which it called for consumers to be offered better tools to allow them to compare different mortgage brokers.
The FCA says: “The use of a panel in itself does not have a negative impact, but intermediaries that place business with fewer lenders sell on average more expensive products compared to those placing business with more lenders.”
It says: “Based on our data analysis, we found that intermediary firms that use a small number of lenders recommend more expensive products on average compared to intermediary firms who use a greater number.
“The price difference could be around £400 for the first year of the incentivised period of the median loan amount.”
The FCA research found that mortgage brokers who work from a restricted panel of lenders represent about two-thirds of the market.
Yet it discovered that irrespective of whether or not brokers operated a panel, there were wide variations in how many lenders different intermediary firms would use.