What each party actually does
Lender
- Holds capital and provides the loan.
- Underwrites the application against its own criteria.
- Owns the legal charge on your property.
- Manages the mortgage account for the full term.
- Operates under FCA permissions to lend (regulated by FCA + PRA for deposit-takers).
Credit broker (mortgage broker)
- Sources products from a panel of lenders (whole-of-market or restricted panel).
- Recommends suitable products based on your criteria.
- Submits the application and chases through to offer.
- Holds no money — never the lender of record.
- Operates under FCA 'credit broking' / 'mortgage mediation' permissions.
Why the distinction matters in practice
- Specialist lenders are broker-only. Pepper Money, Vida, Kensington, Precise, Bluestone, Together, Foundation, Landbay, Paragon — all distribute through brokers only. If you have adverse credit, expat status, complex income or specialist property, going direct to your bank misses the lenders that would actually approve you.
- Whole-of-market vs single lender. Your bank shows you their products only. A whole-of-market broker compares 90+ lenders. Even within mainstream pricing, the best rate moves between lenders weekly.
- Procuration fees are baked in. Lenders pay brokers 0.30%–0.40% commission regardless of whether you used a broker or applied direct. Going direct doesn't save you money.
Hybrid firms — broker and lender
Some UK firms hold both permissions:
- Habito — primarily broker, also originates Habito One products.
- Trussle / Mojo — broker only.
- L&C Mortgages — broker only.
- High-street banks (Halifax, Barclays, etc) — lender direct, occasionally use third-party brokers for specialist segments.
Always check the FCA Register (register.fca.org.uk) for a firm's exact permissions and any restrictions.
When going direct to a lender makes sense
- Product transfer with your existing lender — they typically offer a 'loyalty' rate via their direct channel.
- You're absolutely certain your bank has the best rate for your profile (rare).
- Your situation is very simple (employed, clean credit, mainstream property) and you want to avoid broker fees.
- You've already worked with a broker to confirm the bank is competitive.
When using a broker is essential
- Adverse credit (defaults, CCJs, IVAs, bankruptcies).
- Self-employed with complex income.
- Contractors, day-rate workers.
- Expats and foreign nationals.
- Buy-to-let portfolios (4+ properties triggers PRA portfolio rules).
- HMO, holiday let, semi-commercial.
- Limited company SPV structures.
- Complex affordability (multiple income sources, bonuses, dividends).
- First-time buyers needing 5.5×+ income multiples.
- Anyone outside the absolute mainstream.
FCA regulation — who covers what
- Lenders: regulated by FCA + PRA (banks) or FCA only (non-bank lenders).
- Brokers: regulated by FCA under credit broking / mortgage mediation permissions.
- Both must comply with FCA Conduct of Business rules (MCOB for mortgages).
- Both must provide clear fee disclosure, give suitable advice, and treat customers fairly.
- Both come under the Financial Ombudsman Service if you complain.
Pros
- Lender direct = simpler chain, single point of contact.
- Broker = access to whole market, specialist lenders, complex case expertise.
- Procuration fees mean broker access is usually free to you.
- Hybrid firms can combine flexibility of broker with own products.
- FCA regulates both, with FOS recourse for either.
Cons
- Going direct misses 90%+ of the UK lender market.
- Specialist lenders won't accept direct applications.
- Broker fees can add £500–£1,500 for complex cases.
- Single-bank applications fail more often without backup options.
- Panel-restricted brokers may not be genuinely whole-of-market.