Mortgage affordability is expected to become a more pressing issue by 2027, according to new research from Phoebus Software.
The findings were revealed during a live poll at the Future of Mortgage Servicing conference at the Belfry, hosted by Phoebus Software alongside Target Group and the Financial Services Forum.
Senior figures from across the mortgage sector were asked whether affordability was set to become a more pressing issue by 2027.
Based on responses from 100 C-suite mortgage professionals, 77% of lenders said affordability was likely to worsen. Nearly half of those polled, 47%, believed the situation would become worse, while a further 30% said it would become significantly worse.
By contrast, 17% of respondents said affordability would remain broadly unchanged, while just 7% thought it would improve.
Adam Oldfield, chief executive at Phoebus Software, said: “Despite a resilient housing market and lower rates than 12 months ago, the tax increases announced in the budget, along with higher unemployment, could affect mortgage affordability.
“So it’s understandable that industry leaders are predicting that it will become a more pressing issue.
“Whether or not these concerns become reality, as a service provider, we believe it’s critical that mortgage lenders are set up to identify and support customers who may fall into financial difficulty.
“Servicing platforms are increasingly integrated with data analytics to anticipate borrower needs and behaviours, and AI-powered early warning systems can help to identify at-risk customers.
“Colleague training is also paramount, to ensure that customers have access to empathetic human support when they need it.”
HOUSEHOLD FINANCES
Pete O’Connor, chief executive of Target Group, said the poll reflected mounting pressure on household finances following recent fiscal policy decisions.
He said: “The fact that three-quarters of leaders we polled in the mortgage industry expect affordability to worsen highlights the impact of the Chancellor’s use of fiscal drag to raise revenue – bringing 5.2 million people into paying income tax and moving another 4.8 million into the upper rate band, quite aside from the first fuel duty increase in 15 years. All this is eroding disposable incomes.
“Growth expectations have been downgraded for every forthcoming year until the end of the decade and the tax burden is forecast to rise to an all-time high of 38.3% of GDP in 2030. So lenders are not being unreasonable.
“Let’s not forget the rate of UK unemployment rose to 5.1% in the three months to October as unemployment hits a post-pandemic high, showing another sign the jobs market has weakened.
“Having said that, while there are challenges ahead, there are also solutions – and we will help lenders find a positive way forward.”
