Mortgage affordability is expected to come under increasing pressure over the next two years with three-quarters of lenders predicting conditions will deteriorate by 2027, according to new research from Phoebus Software.
The findings were revealed during a live poll of senior mortgage executives at the Future of Mortgage Servicing conference, held at the Belfry and hosted by Phoebus Software alongside Target Group and the Financial Services Forum.
Based on responses from 100 C-suite mortgage professionals, 77% said affordability pressures were likely to intensify.
Nearly half of those polled, 47%, expected affordability to worsen, while a further 30% believed it would become significantly worse. By contrast, 17% said conditions would remain broadly unchanged and just 7% anticipated an improvement.
ECONOMIC PRESSURES
Adam Oldfield, Chief Executive of Phoebus Software, says that despite recent falls in mortgage rates, wider economic pressures were weighing on household finances.
“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.”
Oldfield added that lenders needed to be prepared to identify and support borrowers who may face financial difficulty, highlighting the growing role of data analytics and AI-driven early warning systems in mortgage servicing, alongside staff training to ensure customers receive appropriate human support.
MOUNTING PRESSURE
Pete O’Connor, Chief Executive of Target Group, says the poll reflects mounting pressure on disposable incomes following recent fiscal policy decisions.
“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,” he says, pointing to millions being drawn into higher tax bands and the first fuel duty rise in 15 years.
O’Connor says that growth forecasts have been downgraded for the remainder of the decade, with the tax burden projected to reach a record 38.3% of GDP by 2030.
He also cites the rise in unemployment to 5.1% as evidence of a weakening labour market, adding that while challenges lie ahead, lenders still have tools available to manage the risks.
