The Financial Services Compensation Scheme paid £1.6 million in compensation for bad mortgage advice in 2025/26, more than three times the £500,000 paid the year before. Most of the rise relates to claims against Principal Mortgage Services, which was declared in default in 2011, though average payouts per claim actually fell.
TL;DR · LAST REVIEWED Updated 2 July 2026
- FSCS paid £1.6 million for mortgage advice claims in 2025/26, up from £500,000.
- Most of the rise, around £1.1 million, relates to claims against Principal Mortgage Services.
- 94 new claims were made, with 70 upheld, an uphold rate of 41%, up from 18%.
- Average compensation per claim fell from £27,000 to £23,000.
KEY FACTS
- FSCS paid £1.6 million in mortgage advice compensation in 2025/26, up from £500,000 in 2024/25.
- £1.1 million related to unsuitable remortgage advice claims against Principal Mortgage Services, in default since 2011.
- 94 new claims were made against the home finance intermediation class, up from 90 the year before.
- 70 decisions were upheld, an uphold rate of 41%, up sharply from 18% the previous year.
- Average compensation per claim fell from £27,000 to £23,000.
- Mortgage advisers paid no annual levy in 2025/26, as carried-over surpluses covered costs, but the home finance intermediation class ended the year with a £2.4 million deficit.
The Financial Services Compensation Scheme paid out £1.6 million in compensation for bad mortgage advice in the 2025/26 financial year, more than three times the £500,000 paid the year before. The rise is driven overwhelmingly by one firm: Principal Mortgage Services, which was declared in default back in 2011 and still accounts for the majority of active claims in this category.
FSCS mortgage advice compensation by year
Why the total rose while average payouts fell
The increase reflects a higher volume of claims decisions being made and upheld, not larger individual payouts. There were 94 new claims against the home finance intermediation class in 2025/26, up from 90 the year before, but the proportion being upheld jumped sharply, from an uphold rate of 18% to 41%, meaning 70 decisions were upheld compared with just 20 previously. At the same time, the average compensation per claim actually fell, from £27,000 to £23,000, meaning the total rise came from more successful claims rather than bigger ones.
Who pays for this, and what it means for the wider levy
Mortgage advisers as a class paid no annual FSCS levy in 2025/26, since surpluses carried over from previous years covered the cost. Those surpluses have now been fully used, leaving the home finance intermediation class with a £2.4 million deficit, driven by higher claims volumes and management costs. The FSCS has said a levy will be needed from mortgage advisers in the next financial year to cover this shortfall, meaning firms in this class should expect a bill after several levy-free years.
Separately, the FSCS's overall compensation bill across all classes reached £267 million in 2025/26, covering around 14,000 individuals, with the largest single category, life distribution and investment intermediation claims, rising from £110 million to £125 million year on year, driven mainly by unsuitable investment, pension and SIPP advice claims.
What this means if you think you were given bad mortgage advice
The FSCS automatically compensates eligible claims once a firm has been declared in default, so anyone who received advice from a firm that has since failed does not need to take out a new policy or pay for a claims company to be eligible. Claims can be made directly through the FSCS website, and eligibility depends on whether the advising firm was FCA-authorised at the time and has since been declared in default.
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DISCLAIMER
This article is editorial information, not financial advice. Kael Tripton Ltd is not authorised or regulated by the Financial Conduct Authority. Figures were correct at the last review date shown above; verify current rates and rules with the primary sources listed below before acting.
Frequently asked questions
How much did FSCS pay in mortgage advice compensation in 2025/26?
£1.6 million, up from £500,000 the year before, mostly linked to claims against Principal Mortgage Services.
Why did the total rise while average payouts fell?
More claims were upheld: the uphold rate rose from 18% to 41%, while the average payout per claim fell from £27,000 to £23,000.
Do I need a claims company to get FSCS compensation?
No. FSCS pays eligible claims directly once a firm is declared in default; you can claim through the FSCS website without paying a claims company.
Will mortgage advisers pay more into the FSCS levy next year?
Likely yes. The home finance intermediation class ended 2025/26 with a £2.4 million deficit after exhausting its carried-over surplus.
SOURCES
- Mortgage Solutions: FSCS mortgage advice compensation rises to 1.6m in 2025/26 – accessed 2 July 2026
- FSCS: What we cover – accessed 2 July 2026
