A poll of senior mortgage executives has found widespread concern that in-house servicing operations are ill equipped for a more volatile economic climate.

Lenders’ own servicing teams are not ready to support borrowers as economic conditions worsen, according to new findings unveiled at the inaugural Future of Mortgage Servicing Conference, hosted by Target Group, Phoebus Software and the Financial Services Forum at the Belfry in Birmingham.

Delegates — around 100 c-suite leaders from across the mortgage market — were asked: “In the face of an economic environment that is set to become more volatile, are your in-house servicing teams ready to support borrowers?”

The poll revealed that 47% of lenders believed their teams were not ready. A further 12% were unsure. Only two in every five respondents expressed confidence in their organisation’s capacity to cope with the demands of a more challenging economic landscape.

ECONOMIC VOLATILITY TOP OF MIND

The findings come as lenders grapple with a combination of rising regulatory expectations, rapid advances in AI, a tougher economic outlook and increasingly sophisticated cyber threats — all of which are reshaping the demands placed on servicing operations.

Pete O’Connor (pictured), the chief executive of Target Group, said: “Target has been servicing loans books and working in the payments and collections space for more than four decades. We have experienced a great deal of economic volatility in that time.

“The early 1990s recession, following the Lawson boom and ERM crisis, saw base rates peak at 15% ahead of a 20% house-price crash which left one point eight million households in negative equity and drove mortgage possessions to a record 75,610 in 1991.”

He added that subsequent crises — from the global financial crisis, which pushed unemployment to 8% and sent possessions to 48,900 in 2009, to the more recent cost-of-living squeeze and the spike in arrears following the Truss mini-Budget — demonstrate how quickly pressures can escalate.

“So, we know that when the economic environment becomes more volatile, arrears and possessions skyrocket.

“While regulatory forbearance and lender flexibility might keep totals below 1990s peaks in the months and years ahead, lenders themselves know their teams aren’t ready for the shift away from a relatively benign economic environment towards a more volatile world.”

O’Connor said lenders processed around three hundred possession claims per working day during the 1991 recession — far beyond the capacity of many modern servicing teams which were built for the low-arrears conditions of the 2010s.

He warned that without investment in scalability and automation, even a modest 20% rise in serious arrears could place systems under severe strain within weeks.