UK mortgage arrears fall as refinancing risks persist

By Milan Rojan

UK mortgage arrears have fallen, while lenders have continued to use technology-enabled servicing and early intervention to support borrowers facing financial pressure, according to Target Group following the latest UK Finance arrears and possessions data..

Melanie Spencer, Growth Director at Target Group, has said the decline in arrears has suggested that mortgage borrowers have remained resilient despite economic pressures. She has also highlighted the role of lenders in identifying financial difficulties early and providing appropriate forbearance.

“A further fall in mortgage arrears suggests that despite the financial pressures households have faced in recent years, mortgage borrowers are managing to stay in the black,” Spencer has said.

Target Group, which provides financial technology and outsourcing services to the lending sector, has highlighted the importance of responsive mortgage servicing as borrowers have approached refinancing points.

Spencer has warned that falling arrears have not removed risks facing borrowers. Energy prices, shipping disruption, inflation expectations and movements in lender funding costs have continued to influence mortgage pricing, creating uncertainty for customers reaching the end of fixed-rate deals.

The use of technology and data has therefore remained important for lenders seeking to monitor borrower behaviour, identify emerging financial stress and intervene before difficulties have escalated. Digital lending and servicing platforms have increasingly supported these processes by helping lenders manage customer journeys and operational workflows.

“Falling arrears shouldn’t mean complacency,” Spencer has said, adding that lenders need to remain ready to identify and support customers when their circumstances have changed.

Possessions have also declined during the latest quarter, indicating that severe mortgage distress has remained contained. However, Target Group has stressed that lenders still need to manage vulnerable and financially stressed customers effectively.

The latest data has presented a relatively resilient picture for the UK mortgage market, while highlighting the continuing role of technology-enabled lending operations in managing refinancing and affordability risks.