Mind the Gap: How Mortgage Communications Leave Vulnerable Customers Behind

Introduction

Navigating the complex world of mortgages is challenging for many consumers, but for those in vulnerable circumstances, the struggle to understand and engage with mortgage communications can be particularly daunting. The recently released Fairer Finance Autumn 2024 customer experience ratings reveal concerning disparities in how different groups perceive the clarity, fairness, and effectiveness of their mortgage provider's communications.

Confidence Matters

Financial confidence plays a significant role in how customers perceive mortgage communications. Our data shows a stark 16 percentage point difference between those who feel confident managing their finances and those who don't. Only 45% of those lacking confidence agree that their provider's communications enable them to make effective and timely decisions, compared to 61% of confident customers.

This trend persists across other measures, with those lacking confidence consistently reporting lower agreement rates regarding the ease of understanding (14 percentage point gap), tailoring to individual needs (17 percentage point gap), and overall clarity and fairness (16-point gap) of communications.

The Financial Resilience of Unclear Communications

For customers already burdened by financial strain, unclear mortgage communications only add to their stress. Our findings show that among those who struggle with bills, only 53% find their provider's communications easy to understand, compared to 63% of those not facing such burdens—a notable 10-point difference.

Moreover, only 48% of financially strained customers feel communications are tailored to their needs, and 54% perceive them as clear and fair. These figures highlight the need for mortgage lenders to do more to support those in precarious financial situations.

Health Challenges and Negative Life Events

While the gaps are less pronounced, customers facing health challenges or dealing with negative life events also report lower satisfaction with mortgage communications compared to those not facing such difficulties. 

For example, only 45% of those with health conditions feel communications are tailored to their needs, an 8 percentage point difference compared to those without health issues. Similarly, customers who experienced negative life events are 4 percentage points less likely to agree that communications are clear and fair.

These disparities, while smaller in magnitude, point to a broader trend of mortgage providers falling short in addressing the unique needs of potentially vulnerable customer groups.

The Path Forward: Clarity, Empathy, and Personalisation 

The Fairer Finance data paints a clear picture: mortgage providers must do more to support vulnerable customers through clearer, more empathetic, and tailored communications. The Financial Conduct Authority (FCA) has repeatedly emphasised the importance of treating vulnerable customers fairly [1], providing guidance on tailoring support for those in financial difficulty [2].

To bridge these communication gaps, mortgage providers should focus on:

1. Simplifying language and explaining key terms to make information more accessible, especially for those with lower financial confidence.

2. Personalising messages to address the specific needs and circumstances of individual customers, particularly those facing financial strain, health issues, or negative life events.

3. Providing clear, actionable guidance to help customers make informed, timely decisions about their mortgages.

By prioritising these three key areas, mortgage providers can demonstrate a genuine commitment to supporting all customers, regardless of their circumstances. As the industry evolves, developing clear, accessible, and personalised communication strategies will be essential not only for meeting regulatory expectations but also for building stronger, more trusting relationships with the customers who need it most.

How companies achieve this will be a challenge and there is no one size fits all solution to this challenge. However, the outcomes based approach to consumer duty allows for creativity in solving this issue and providers should not feel constrained by traditional modes of communications when trying to communicate clearly with their customers. 

References

[1] FCA guidance on the fair treatment of vulnerable customers, https://www.fca.org.uk/publications/finalised-guidance/guidance-firms-fair-treatment-vulnerable-customers

[2] FCA urges mortgage lenders to support vulnerable customers, https://www.mortgagesolutions.co.uk/news/2023/07/12/fca-urges-mortgage-lenders-to-support-vulnerable-customers/