In the context of UK mortgages, “intermediation” and “disintermediation” refer to the involvement of intermediaries (usually mortgage brokers) in the mortgage process.

Intermediation

Intermediation in the UK mortgage market involves the use of intermediaries, typically mortgage brokers, who act as middlemen between borrowers and lenders.

• Role of Brokers: Mortgage brokers help potential borrowers find suitable mortgage products by comparing various offers from different lenders. They provide advice, assess the borrower’s financial situation, and handle much of the paperwork.
• Advantages:
  • Expert Advice: Brokers often have deep knowledge of the market and can offer tailored advice.
  • Access to More Products: They may have access to exclusive deals not available directly to consumers.
  • Convenience: Brokers handle the application process, making it more convenient for borrowers.
• Regulation: Mortgage brokers in the UK are regulated by the Financial Conduct Authority (FCA), ensuring they meet certain standards and provide appropriate advice.

Disintermediation

Disintermediation in the UK mortgage market refers to the process where borrowers deal directly with lenders, bypassing intermediaries.

• Direct Lending: Borrowers apply for mortgages directly with banks, building societies, or other mortgage providers.
• Advantages:
  • Cost Savings: By eliminating the middleman, borrowers may save on broker fees or commissions.
  • Direct Relationship: Borrowers build a direct relationship with the lender, which can be beneficial for negotiations or future dealings.
  • Simplicity: The process may be more straightforward without an intermediary.
• Challenges:
  • Limited Choices: Borrowers may not have access to the full range of products available in the market.
  • Lack of Expertise: Without a broker, borrowers might miss out on expert advice and could end up with a less suitable mortgage product.

Comparison

1. Market Access:
   • Intermediation: Broader access to various lenders and mortgage products.
   • Disintermediation: Limited to the products and rates offered by the lenders approached directly.
2. Cost:
   • Intermediation: Potential additional costs for broker services, though sometimes the lender pays the broker.
   • Disintermediation: Possible savings on broker fees, but not always significant if the borrower lacks negotiation skills.
3. Complexity:
   • Intermediation: Simplified process due to broker handling paperwork and negotiations.
   • Disintermediation: Borrower handles all aspects, potentially more complex and time-consuming.
4. Regulation and Advice:
   • Intermediation: Regulated advice from brokers can ensure suitability and compliance.
   • Disintermediation: Borrowers must rely on their understanding and research.

In summary, intermediation involves using brokers to facilitate the mortgage process, offering expertise and access to a wide range of products, while disintermediation involves dealing directly with lenders, potentially saving on costs but requiring more effort and knowledge from the borrower.