By Richard Pike, sales and marketing director, Phoebus Software Limited
Although interest rates are very low compared to the heady days of the 80s and 90s, the fact remains that they will most probably at least quadruple this year. Mix this with inflation moving towards 10 per cent, those borrowers who stretched themselves to get on the property ladder, whether on fixed rates or not, will find monthly affordability a bit more of a struggle than they envisaged.
Rise in credit
Recent Bank of England statistics showed that credit card borrowing was up 10.6 per cent in the last year, the biggest rise in three years. Some of this will be because of the fact that unsecured credit is so readily available, but some will be because monthly disposable income is being squeezed.
An area in particular that has been reported on appears to be disproportionate borrowing rates on personal overdrafts, with many equivalent annual percentage rates at well over 30 per cent, compared with what were similar rates to credit cards pre-pandemic.
All in all, if this situation continues to worsen, it will be the secured lenders no doubt that will be told to show the most forbearance to ensure people are kept in their homes.
And of course, all of this in a backdrop of the economies of some global powerhouses seeing GDP predicted to decrease, which will only have a knock-on effect to the UK and other major countries.
We must also remember that house prices boomed during the pandemic and many commentators are becoming more pessimistic about downward corrections in the valuation of property in the UK, whether regionally or otherwise.
What we have seen to counter this is a large swing in the market towards recruiting collectors compared with previous years; and this is clearly an indication of the risk that many institutions feel they have on their portfolios at the moment.
Investment in people is always a good thing, but there shouldn’t be the need to manually deal with primary or special servicing these days. Servicing solutions should automate standard processes such as events triggering automated letters, texts, etc, meaning collectors can deal with cases that need to be dealt with in more detail.
A self-service portal allowing borrowers to request information and make payments, etc, will also keep inbound call volumes down. Servicing call centre users can now benefit from screens that are powered by artificial intelligence (AI) and predict the most likely borrower requirements. The AI can suggest the screens and information required based on similar case outcomes on the portfolio.
Whereas there has been a focus on originations platform replacement for some time, there is now an influx of lenders and servicers looking at ensuring their servicing platforms are fit for purpose and future proofed. With transformation project timelines also being shortened due to automated migration activities, this is now being seen as a key strategic area and win for many institutions.