GUIDING LIGHT
MORTGAGE PRISONERS, WHAT STEPS CAN THE INDUSTRY TAKE TO HELP?

Aptean

In the UK, borrowers trapped in their current, more expensive mortgage who can’t re-finance for a cheaper loan have been dubbed ‘mortgage prisoners’ in recent years.

The pandemic shone a spotlight on their situation. A recent report by the London School of Economics (LSE) found that those in this situation were up to 40% more likely to default on their mortgage payments.

The UK’s Financial Conduct Authority (FCA) has made efforts to address the issue of mortgage prisoners over the last few years, but progress appears to have been offset by the impact of the coronavirus pandemic and resulting economic downturn.

WHAT CAN LENDERS DO?
The LSE report suggests that the UK’s Treasury offer interest-free government equity loans and ‘mortgage rescue’ to help homeowners, but what about the financial services organisations to whom these mortgage prisoners are in debt?

One thing lenders can do is improve communications with customers who find themselves locked into unaffordable mortgages. They can provide better information about who owns their mortgages, the regulatory status of those owners and advise which protections are available to the customer. All this is dependent on identifying mortgage prisoners from the outset. Some customers may be unaware that they’re actually in the situation of being locked-in to an unaffordable mortgage product.

Lenders need to first identify who these mortgage prisoners are before they can respond accordingly, similarly to other vulnerable customers who don’t or won’t identify as vulnerable.

There’s the issue of new vulnerability, too, with increasing numbers of customers finding their personal circumstances changed considerably due to the pandemic. This puts the onus on responsible lenders to get a comprehensive picture of each and every customer before deciding how best to communicate and address their particular needs.

At the crux of the matter is customer data and how financial services institutions ensure they gather the right information while optimising how it’s used. It’s crucial to have the right systems in place to log all customer interactions. This helps businesses to pinpoint patterns in behaviour or communications that would suggest a change in circumstances. The ability of the systems predefined workflows to steer the customer service agent in the right direction for follow-up actions, is also paramount.

This includes suggesting which communications should be sent out to customers next or which products could be made available. Crucially, when it comes to mortgage prisoners, the system would trigger a send of the factual information needed while steering the customer in the direction of support relevant to his or her specific circumstance.

What’s right for one struggling borrower may not be right for another but, with the right systems and processes in place, lenders can facilitate nuanced communications, treating every customer as an individual, in line with their specific needs.

It’s vital for lenders to understand and support the needs of mortgage prisoners if they are to play their role in ending the dire situation in which increasing numbers of customers find themselves. Lenders can kick-start a chain of measures to proactively help by training staff how to best handle this type of customer, putting in place the systems which help identify and respond to their specific need.

It’s only with this infrastructure in place that lenders can offer appropriate, more flexible products, services and advice while improving the situation for an increasing percentage of the population.

Laura Marshall
Senior Account Executive
Aptean