What impact has the pandemic had on vulnerable customers and their situations?
The tragic truth is that many vulnerable customers were made more vulnerable by the pandemic. Cancelled operations, delayed treatments and even reduced support systems as a result of family and friends not being able to visit have all had a detrimental impact on individuals.
As well as impacting physical health, the reduction in face-to-face contact and increased stressors affected many people from a mental health perspective too.
The pandemic also created a new cohort of vulnerable customers.
Many of those who lost jobs or suffered wage cuts now face financial strain, increased concerns about job security, and worries over their ability to borrow and pay back loans. With these growing groups of vulnerable individuals, it’s important to remember that ‘vulnerability’ can come in many different forms, and it’s key that brokers are able to understand and recognise each of them.
How do you see this changing in 2022?
Many customers have already started to see their overall cost of living increase drastically, and with the price of oil and gas skyrocketing, there remains the risk that many more people will start to struggle.
These hikes in turn have the power to reduce borrowers’ access to certain mortgage products and deals if their affordability assessment is impacted, forcing them into unfavourable rates or onto their lender’s standard variable rate (SVR).
Approximately two million mortgage borrowers in the UK are on a tracker or SVR mortgage. Whilst for some this might be the best option, it’s paramount that they understand how their repayments could increase.
For vulnerable customers and those already struggling with their finances, it’s important for brokers to have potentially tough conversations, illustrating how any rate rises could impact their customers’ finances and financial wellbeing.
It’s here that clubs and networks have a vital role to play in supporting brokers to have these conversations and ensuring they are achieving the best possible outcomes. Educational articles, webinars and events alongside training programmes are all great ways for brokers to get more comfortable with recognising and talking to vulnerable customers.
How has the market adapted to help vulnerable customers?
The industry has adapted in many ways to support vulnerable customers with technology, flexibility, collaboration between brokers, networks, lenders and providers, and through the increased focus on this topic from the regulator.
Brokers have ensured their approach to advice is flexible to meet the needs of their customers. Largely, sessions with customers have been virtual, and using technology such as Zoom and Microsoft Teams has been vital.
Discussing the availability and accessibility of support packages for customers in financial strain has also helped customers struggling to meet not just mortgage payments, but also those with unsecured debts. Some networks have also launched support hubs through their customer relationship management systems.
The treatment of vulnerable customers is also high on the Financial Conduct Authority’s (FCA’s) agenda. The FCA released finalised guidance for firms on the fair treatment of vulnerable customers in February 2021. This provided clarity on what it expects, enabling firms to review their approach to vulnerable customers to ensure they receive the same outcomes as non-vulnerable customers.
In addition, the FCA is consulting on a new consumer duty which aims to set higher expectations.
Do you think the removal of the additional stress test, as recently reported, will allow more complex borrowers get onto the housing ladder?
The Financial Policy Committee (FPC) originally introduced the rules to reduce the risk of homeowners becoming overstretched and therefore stuck with a mortgage that was potentially unaffordable.
However, with demand for property continuing to outstrip supply and push up house prices, many younger borrowers are struggling to buy homes. We welcome measures to help first-time buyers access the property market in a safe and affordable way, however this should be considered with caution.
Younger borrowers with limited financial experience can be vulnerable too. This may be because they have never experienced high rates in their lifetimes and may not be aware of the financial impact they could have. As a result, brokers can help to explain the varying outcomes of higher interest rates and inflation on the products they have on offer.
What can brokers do to support their vulnerable clients?
Brokers must have a flexible approach to client communications and be empathetic to any specific needs or concerns vulnerable customers may have. By listening to their clients’ needs, brokers can adapt their service appropriately to provide bespoke advice based on their clients’ circumstances, whether that be to guide customers towards specialist services, like charities for people experiencing financial difficulty, or by discussing the different options which are most suitable for them.
However, it is fundamental that fair treatment is embedded into broker businesses and throughout the customer journey.
It is important for all brokers to make sure they are aware of the signs of vulnerability, which are not always obvious in the case of mental and financial wellbeing, and can confidently and sensitively ask the right questions to ensure the right outcomes are being provided for these customers.