The Intermediary – February 2025 - Flipbook - Page 14
RESIDENTIAL
Opinion
Today’s lending
challenges suggest a
familiar conclusion
B
eing able to pivot
operationally to meet
new niches and avoid
customer detriment
has never been more
important than today.
Lenders must also face the reality of
the inefficiency delivered by archaic
legacy systems.
In the 18 months since the Financial
Conduct Authority’s (FCA) Consumer
Duty rules came into effect, how
lenders as an industry interact with
customers has undergone a change
in mindset.
Central to the duty is a core
principle requiring firms to act to
deliver good outcomes for retail
customers. The rules require firms
to consider the needs, characteristics
and objectives of their customers –
including those with characteristics of
vulnerability.
Though this refers just to existing
customers, given it cannot extend to
those without a formal relationship
with the provider, it does prompt some
interesting thinking.
In assessing where there may be
vulnerability among a customer
base, it can become clearer where
underserved customers lie.
Let’s consider the impact of this
new regulation, and some of the other
factors in determining where we
can anticipate the highest customer
demand this year.
The power to exclude
Regulation and technical change
can inadvertently exclude cohorts
– mortgage borrowers who became
unable to remortgage due to the
affordability rules that came in under
2014’s mortgage market review are an
obvious example of this.
There are many more examples
– onerous leasehold terms, energy
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The Intermediary | February 2025
efficiency standards, variable
income assessments, the list goes on.
Lenders are considering the type of
vulnerabilities that exist in their back
books and working out strategies to
ensure those customers are supported
to ensure the best outcomes they can
reasonably expect.
In doing so, we’re seeing a
developing understanding of what
financial inclusion and exclusion
means. Lenders have a responsibility
to support customers to achieve good
outcomes, and over time that will
mean evolving their proposition,
product set and service delivery to
meet the needs of those customers.
It is not just regulatory and
technical change that can lead
to exclusion, either. Changes to
a borrower’s circumstances are
increasingly common, and it looks
likely that 2025 will hold its fair share
of financial challenges.
Domestic challenges
In her first Budget, Chancellor Rachel
Reeves announced that employers’
National Insurance (NI) contributions
will rise from 13.8% to 15% from April
2025. Businesses warned that there
would be a fallout, and we have seen
a ra of redundancy announcements
across a range of sectors. The Centre
for Retail Research says almost 170,000
retail workers lost their jobs last year
as 38 big retailers collapsed. This year
may be just as tough – and many of
these people will have mortgages.
With financial pressure oen comes
pressure at home. Around 100,000
couples divorce each year in England
and Wales, and untangling marital
finances can be a nightmare. A recent
research project led by the University
of Bristol and Nuffield Foundation
surveyed 2,415 individuals who had
divorced in the previous five years.
JERRY MULLE
is UK managing director
at Ohpen
Two-thirds owned their home. A
third of those had homes with a net
value of less than £100,000.
We talk a lot about the plight of
first-time buyers struggling to save
sufficient deposits to get on the ladder.
Perhaps we forget to talk enough about
large numbers of homeowners who
are faced with the same problems
in the aermath of a divorce – half
the capital and a single income
dramatically reduces your options
when it comes to buying aer a split.
What does 2025 hold?
In January, Government borrowing
costs hit a 16-year high as markets
reacted to the potential impact of
Labour’s promises to raise public
sector pay and up public spending.
British businesses and households are
facing steep tax rises, and there have
been several warnings that this could
lead to a drop in economic growth and
higher inflation.
In the US, Donald Trump is back
in the Oval Office and has imposed
significant trade tariffs on countries
exporting goods and services there.
The uncertainty is weighing on the
UK and pushing up gilt yields. So far,
the consequences of much of this is
yet to be felt. Mortgage lenders are
aware of all of this, and many are wellpositioned to support their customers
through challenges. Others are not.
Operational models have had to
flex for a plethora of reasons over the
last decade, placing pressure on old
processes and systems. What today’s
regulatory, economic, political and
social environment illustrates is that
the drivers might change, but the need
to flex quickly to make the most of
opportunity remains key to surviving
in the long-term. ●
