The Future of Mortgage Servicing conference, held at the Belfry and hosted by Phoebus Software, Target Group, and the Financial Services Forum, recently brought together key figures from the mortgage sector to discuss emerging challenges in the housing market.
One of the central questions posed to attendees was whether mortgage affordability is expected to become a more pressing issue by 2027. This topic has gained increasing attention as lenders, policymakers, and consumers alike consider the longer-term outlook for housing finance.
A total of 100 industry professionals responded to the survey, and the results revealed a clear consensus: 77% agreed that mortgage affordability would become more of a concern over the next two years.
Breaking down these figures further, nearly half of the respondents, 47%, predicted that affordability would worsen, while a significant 30% felt it would deteriorate considerably. These numbers reflect a growing unease about the combined impact of economic pressures and rising costs on borrowers.
Only a minority of respondents were more optimistic. Around 17% believed there would be no change in mortgage affordability, and just 7% expected the situation to improve. This demonstrates that very few in the sector see conditions easing in the near term.
Adam Oldfield, CEO of Phoebus Software, offered insight into why these concerns are emerging. He pointed out that although the housing market remains resilient and interest rates are lower than they were 12 months ago, broader economic factors could negatively affect mortgage affordability.
“In particular, the recent Budget introduced tax increases, while higher unemployment adds further pressure on households,” Oldfield explained. “Given these circumstances, it is understandable that mortgage industry leaders are forecasting affordability challenges ahead.”
Oldfield also emphasised that lenders are increasingly focused on identifying borrowers who may struggle financially and providing them with support. Servicing platforms are becoming more sophisticated, integrating data analytics to anticipate borrower needs and behaviours.
He added that artificial intelligence-powered early warning systems are now being used to flag customers who could be at risk of financial difficulty. This technology allows lenders to intervene proactively and offer assistance before issues escalate.
Training staff to provide empathetic human support is another key focus. Oldfield noted that having well-trained colleagues available ensures that customers receive the guidance and reassurance they need during potentially stressful periods.
Pete O’Connor, CEO of Target Group, echoed these concerns. He highlighted that three-quarters of mortgage leaders surveyed expect affordability to worsen, noting the role of government fiscal policy in shaping the outlook.
O’Connor explained that measures such as the Chancellor’s use of fiscal drag have increased the tax burden on millions of households. Specifically, 5.2 million more people have been brought into paying income tax, while another 4.8 million have moved into the higher-rate tax band. These shifts, along with the first increase in fuel duty for 15 years, are steadily reducing disposable incomes.
He also pointed to downgraded growth expectations as a contributing factor. Economic forecasts have been revised downward for every forthcoming year until the end of the decade, and the tax burden is projected to reach an unprecedented 38.3% of GDP by 2030.
The unemployment situation further compounds affordability concerns. O’Connor noted that the UK’s unemployment rate rose to 5.1% in the three months to October, a post-pandemic high, signalling ongoing pressures in the labour market.
Despite these challenges, both Oldfield and O’Connor emphasised that solutions exist. By leveraging advanced servicing platforms, data analytics, and trained staff, lenders can support borrowers through difficult times and help ensure the mortgage market remains sustainable in the years ahead.
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