If we think back even one year, mortgage lenders were largely focused on market share and completing large volumes of transactions which underpinned hugely successful financial performances.

Getting business in and done has always been important but we are now moving through the credit cycle. The dawn of a new period of arrears is almost certainly upon us and with it come different but no less pressing operational challenges. Staffing up and skilling up, let alone having processes and systems in place that can record and measure the effectiveness of a course of action will be critical as the Financial Conduct Authority (FCA) ‘duty of care’ requirements hover above the decisions every lender will take regarding their distressed borrowers’ outcomes.

If there is any comfort, it is that everyone is likely to be in the same troubled waters – even if the size and type of their boat is manifestly different. In its most recent Household Finance Review for the second quarter of the year, UK Finance said that despite the total number of customers in arrears falling for the fifth successive quarter, further and larger increases in arrears can be expected as the cost-of-living crisis grows.

Lenders we speak to are also seeing early warning signs – from requests to change from one monthly payment to two, changes in repayment mechanisms to actual forbearance calls. None of this is unsurmountable at present and full employment is the cog in the economic machine that, while turning, will help many evade seismic disruption. But UK Finance acknowledges that at an aggregate level, cost-of-living pressures have not yet affected households’ ability to pay for their monthly outgoings.

It is new territory for many who have not had to manage financial distress since the global financial crisis. Bosses from high-street banks have been called in for ‘crisis talks’ with the chancellor as homeowners can expect to have the biggest increase in mortgage costs in 14 years. The average rate on a two-year mortgage has now surged to over 6% – the first time since the 2008 financial crisis.

The point here is that if this crisis is as long-term as we all suspect, ensuring operational excellence as a concept is embedded in all parts of the process. It is as important for borrower outcomes when things go wrong as it is when they go right.

Operational excellence is not only about transformation in the originating part of the process but equally about transformation in the servicing part too.

We have already seen how areas of the mortgage process have struggled in this new volatile environment of rapidly rising interest rates, such as product launches and product withdrawals – in part because they have gone untested over the past decade. Arrears will be no different. Can lenders manage a significant increase well enough to ensure the right outcomes for all concerned? And can they evidence these? Lenders need to be ready to understand that there may not, in a tight labour market, be enough skilled people to service the coming growth in arrears. And if the technology and processes are not up to scratch, some will seek to outsource the management. This is understandable but also requires a calm head to put in place the right deal.

Arrears will mean lenders need to open their minds to how they deliver post-completion operational excellence. Short-term fixes may put plasters on the wounds but will not pass muster as long-term cures.