Why supporting vulnerable mortgage customers is more than a regulatory requirement – Baxter

Understanding the confidence gap in mortgage decision-making 

Many UK consumers struggle with confidence when it comes to mortgage-related decisions. Financial terminology, risk assessment, and long-term payment planning can be daunting, especially for those facing complex life circumstances or with limited financial literacy. 

A survey by Compare the Market, reported by MPA Magazine UK in late 2024, revealed that 16% of UK mortgage holders admitted they did not fully understand the mortgage process, or the terminology involved. That figure alone highlights a systemic issue in how financial products are communicated and understood by consumers. 

What is consumer vulnerability – and why it matters 

The Financial Conduct Authority (FCA) defines a vulnerable consumer as someone who, due to personal circumstances, is particularly susceptible to harm, especially if firms fail to act with due care. 

This isn’t a marginal issue. In May 2022, the FCA reported that 47% of UK adults – nearly 25 million people – exhibited one or more characteristics of vulnerability. More recent estimates suggest this figure could be as high as 67%, depending on how the criteria are interpreted. 

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Vulnerability can be temporary or long term, visible or hidden. Factors include: 

• Financial hardship (e.g., job loss, debt)
• Major life events (e.g., divorce, bereavement)
• Health conditions (mental or physical)
• Low literacy or poor understanding of financial products

Walking past vulnerability: the risks 

Failing to identify and support vulnerable customers risks more than reputational damage – it could result in poor consumer outcomes, regulatory scrutiny, and even financial harm. Under the FCA’s Consumer Duty, firms are now required to deliver good outcomes for all retail customers and take particular care with those in vulnerable circumstances. 

Mortgages are long-term commitments, and overlooking vulnerability not only jeopardises customers’ financial wellbeing but also undermines long-term trust in the provider. 

How to recognise the signs 

One of the greatest challenges is that only around 17% of customers may disclose their vulnerability. Many either don’t recognise their own vulnerability or fear stigma.

That’s why frontline mortgage professionals need to take a proactive and empathetic approach. 

Look out for signs such as: 

• Confusion or distress during conversations
• Difficulty understanding terms or options
• Unwillingness to engage with financial detail
• Mention of personal challenges (e.g., illness, separation)

Given that the UK’s average reading age is between nine and 12 and financial literacy remains low, firms should assume a baseline need for clear, simple communication. 

What best practice looks like 

Supporting vulnerable customers requires a shift in mindset and practical action: 

• Simplify communications: Use plain language, avoid jargon, and confirm understanding.
• Train staff: Equip advisers with tools and confidence to spot vulnerability and respond appropriately.
• Provide flexible solutions: Options like payment holidays or tailored repayment plans can make a huge difference.
• Signpost external help: Mental health support, debt charities, and housing advice organisations play a crucial supporting role.
• Create safe spaces: Confidential, judgment-free environments encourage customers to open up.

At its heart, this is about building a culture of inclusion and care – one where vulnerable customers are not just protected but empowered.