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

Mortgage Brokers Face Key Liability Risks Amid Market Volatility

The UK mortgage market is experiencing significant volatility, with lenders reacting to global events and shifting interest rates. Mortgage Strategy has identified three main liability risks currently facing mortgage brokers: administrative errors, the use of AI, and the treatment of vulnerable customers.

The report notes that brokers are under pressure as 1.8 million fixed-rate loans are due to expire this year, increasing workloads. Lenders are also competing to reduce the average period from offer acceptance to move-in date, adding further strain on brokers and their administrative processes.

Administrative Errors

Mortgage brokers are required to communicate with clients, lenders, insurers, and solicitors while adhering to strict regulations. The report highlights that simple data mistakes, such as incorrect addresses or house numbers, can have serious consequences for clients, especially if a claim is needed. Failing to accurately record key conversations or agreements is another common pitfall. The report suggests that brokers should follow up with written confirmation of agreements and maintain thorough documentation to avoid disputes and complaints.

Use of AI

The use of AI in mortgage broking is increasing, but the report warns of potential risks if AI is used without proper oversight. Suitability reports, which formally record advice given, must be checked by mortgage professionals for accuracy. Firms using AI should have clear usage policies and be cautious about how client data is handled, particularly with open-model AI systems. Using such systems without client consent can create liability risks.

Treatment of Vulnerable Customers

The Financial Conduct Authority’s Consumer Duty has introduced new requirements for dealing with vulnerable customers. Mortgage brokers must have procedures to identify and support vulnerable clients, monitor changes in their circumstances, and ensure that advice is properly understood. The absence of key documentation, such as signed suitability letters, is a major factor in complaints upheld by the Financial Ombudsman.

These risks are particularly relevant for letting agents and inventory clerks who work closely with mortgage brokers and need to be aware of the importance of accurate documentation, data handling, and regulatory compliance in the current market climate.