When Consumer Duty was first introduced in 2023, it rightfully shifted the direction of focus for intermediaries from product placement to customer outcomes.
But while many brokers are familiar with what this means regarding standard residential lending, a more complex – and arguably higher risk – area deserves greater attention: refurbishment finance.
For brokers and networks, recommending the wrong funding structure in this space doesn’t just create inconvenience. It can directly undermine the client’s project, finances and ultimately their trust in advice.
The extra attention needed with refurbishments
Refurbishment projects are fundamentally different from standard mortgage cases. The success of the client’s project doesn’t start and end with securing a loan, it relies on the funding arriving at the right time and in the right amounts, throughout the lifecycle of the build.
This is where Consumer Duty becomes highly relevant. The Financial Conduct Authority’s (FCA’s) three cross-cutting rules – acting in good faith, avoiding foreseeable harm and enabling customers to achieve their financial objectives – are all tested more rigorously in refurbishment scenarios than in vanilla mortgage lending.
A recommendation that may appear suitable on day one can quickly become unsuitable. Stage payments may not align with build costs. Cash flow gaps may emerge mid-project. Funding could be delayed or reduced due to valuations. At that point, ‘foreseeable harm’ is no longer theoretical, it’s real.
Many brokers still approach refurbishment lending in the same way as standard mortgages: approaching familiar lenders directly or using sourcing systems to home in on a solution. But this approach introduces a critical weakness.
Standard sourcing tools typically focus on loan to value (LTV), affordability and the headline rate. What they don’t assess is cash flow viability during the build, which is arguably the most crucial consideration when it comes to a refurb project. Similarly, going directly to a lender can expose both the adviser and client to risk. Most lenders offer a limited product range and rely on valuation-based stage payments. This creates uncertainty around how much funding will be released and when.
From a Consumer Duty perspective, that uncertainty is problematic. If a client cannot confidently meet contractor payments or material costs, the risk of project delays – or worse – becomes foreseeable.
Changes needed to avoid foreseeable harm
One of the easiest ways to align refurb recommendations with Consumer Duty is to rethink how stage payments are structured.
Cost-based lending, where funds are released in line with agreed build costs rather than retrospective valuations, offers a fundamentally different outcome profile. This approach provides certainty over funding at each stage, reduced reliance on fluctuating valuations and greater alignment between finance and project execution. In practice, this means the client is far less likely to encounter mid-build funding shortfalls – a key step in avoiding foreseeable harm.
For brokers, it also strengthens the ability to evidence that the recommendation was designed to support the client’s objective: completing their project successfully.
Another often overlooked aspect of Consumer Duty is consumer understanding. Refurbishment finance is inherently complex. Clients may not fully appreciate the difference between valuation and cost-based lending, the timing of stage payments and the impact of cash flow gaps. This means advisers have a duty to go beyond product selection and ensure the client genuinely understands how their funding will work in practice. In this context, specialist support becomes less of a nice-to-have and more of a compliance safeguard.
This is where renovation finance specialists like BuildLoan play a critical role in helping networks and brokers meet Consumer Duty obligations. By integrating expert assessment of build costs, detailed cash flow analysis and access to cost-based stage payments products with guaranteed payments, paid in advance or arrears, they provide a framework that supports all four Consumer Duty outcome areas.
Importantly, this also gives brokers a robust audit trail, demonstrating that the recommendation was suitable, researched and aligned with the client’s needs.
While Consumer Duty is often framed as a regulatory burden, in refurbishment lending, it can be a commercial differentiator. Brokers who embrace a more structured, specialist-led approach are likely to see higher conversion rates, fewer failed or delayed cases, stronger client relationships and referrals.
In contrast, poor outcomes, such as stalled builds or funding shortfalls, can lead not only to complaints and potential FCA scrutiny but also long-term reputational damage.
A key takeaway for brokers
A key takeaway for intermediaries is this: in refurbishment, the product is only part of the advice. The real value lies in ensuring the funding strategy works from start to finish. Consumer Duty has made that expectation explicit. It is no longer enough to recommend a mortgage that fits on paper. Advisers must be confident that it will deliver in practice and through every stage of the client’s project.
In the market where timing, cash flow and certainty are everything, that shift in mindset isn’t just good compliance. It’s essential advice.