Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

FSCS Mortgage Advice Compensation Rises to £1.6m in 2025/26

The Financial Services Compensation Scheme (FSCS) paid out £1.6 million in compensation claims for mortgage advice in 2025/26, with most claims relating to Principal Mortgage Services. The total paid was £1.1 million higher than the previous year, mainly due to an increase in the number of decisions made.

In 2025/26, £1.1 million of the compensation was for claims of unsuitable remortgage advice against Principal Mortgage Services, which was declared in default in 2011. The FSCS reported that the higher compensation total was driven by a greater volume of upheld claims, although the average compensation per claim fell from £27,000 to £23,000.

There were 94 new claims made against the home finance intermediation class in 2025/26, up from 90 in the previous year. Of these, 70 decisions were upheld, compared to 20 the year before, resulting in an uphold rate of 41%, up from 18%.

Mortgage advisers did not pay a levy during the year, as the FSCS used surpluses from previous years to cover costs, including a £5 million refund paid to firms. However, these surpluses were fully used in 2025/26, leaving the home finance intermediation class with a deficit of £2.4 million, attributed to higher claims volumes and management costs. The FSCS stated that a levy would be required in the next financial year to cover costs for mortgage advisers.

For letting agents and inventory clerks, these developments highlight the ongoing impact of compensation claims and regulatory costs within the UK property sector. The FSCS compensation scheme plays a significant role in maintaining consumer confidence and financial stability when firms fail.