We begin 2023 officially in recession – one that the Bank of England (BoE) tells us will endure for the next two years.

April will bring painful tax rises and the threat of another enormous jump in energy bills. Even though the worst off will be spared some of that pain, we are in for a challenging time.

The relentless rise in interest rates in 2022 characterised the changing shape of the mortgage market, with lenders quite suddenly having to withdraw, reprice and relaunch products with almost alarming regularity – particularly as swap rates spiked following the ill-fated mini-Budget in September.

After more than a decade of rock bottom rates, this shift has been palpable and has served as a real wake-up call for many lenders, whose systems simply could not cope with the speed of change required to manage their lending in an orderly way.

This year will be more of the same as the (BoE) battles to bring inflation down from more than a 40-year high.

As more borrowers come off their fixed rate deals, another challenge – one in some ways already with us – will really start to bite.

The rapid and very steep rise in mortgage rates has inflicted abrupt and serious payment shocks on hundreds of thousands of borrowers. More than a million more homeowners are in for the same in 2023.

Piled on top of higher taxes, higher energy bills, higher food prices and inflation running at more than 11%, eroding the value of any remaining income or savings, payment shock is going to be the straw that breaks the camel’s back.

Mortgage lenders have already been told by the Financial Conduct Authority, in no uncertain terms, that it is they who must shoulder that burden – for the foreseeable future at least.

That presents lenders with yet another pressing headache: they must somehow balance the books while facing certain shortfalls in expected income.

Added to this is perhaps the biggest regulatory change the mortgage market has seen since the Mortgage Market Review almost a decade ago. – the Consumer Duty. It comes into force at the end of July and will turn compliance on its head.

Lenders whose systems cannot adapt and flex to accommodate that regulatory requirement – and fast – are going to find themselves at real risk of failing in that duty.

This is particularly true at a time when the economy faces such overwhelming uncertainty and households across the country are struggling to meet their basic living costs.

As ever with the regulator, when it comes to guidance it is just that. Lenders must find a way through what the consumer duty means in practice and what it means as the situation changes – constantly.

Even more important than ensuring good outcomes for consumers in dire financial straits, from compliance’s point of view, is providing evidence for the rationale behind the decisions that lead to those outcomes.

Systems that require six months for an update are simply not going to cut it anymore. Lenders need agility, transparency and speed if they are to meet the demands not only of the new economy but the regulator as well.

Ahmed Michla

Head of Marketing and Communications

Ohpen