Consumer experiencing financial stress

Providing better customer outcomes during times of financial stress 



In our previous article, Fraser Gemmell, Group CEO, took a look at the current market environment in the UK and some of the steps that can be taken to ease the financial stress we see rising alongside interest rates. He highlighted the importance of understanding a given situation through a borrower’s eyes and using that insight to create the right support strategies – a critical part of the upcoming Customer Duty Act. This article takes a closer look at how to do so.


The first thing to highlight is perhaps the most obvious: financial stress can significantly impact human beings, both emotionally and physically, and often compounds in the face of poor interactions with lenders. Mortgage providers and servicers play a critical role in supporting borrowers dealing with such stress and can help mitigate its effects by taking a customer-focused communications approach.  


In this article, I want to explore more thoroughly what financial stress means to people and their behaviour and outline essential principles for lenders to follow that will help provide better customer outcomes. It is based on extensive research on borrower behaviour and ultimately drives home one fundamental lesson: borrowers are human beings, not a series of numbers representing a mortgage or product, and deserve to be treated as such. 


“Service me with understanding, flexibility, recognition of my progress,  

my changing situation, and my loyalty”  


Borrower Quote from Pepper's Customer Experience Research 2020



Understanding human response to financial stress


Stress triggers a similar response in humans: fight or flight. It is a natural physiological reaction to perceived threats or stressful situations hardcoded into our DNA, an instinctual survival mechanism that prepares us to either confront the threat head-on (fight) or escape (flight). Understanding the various aspects of this response is crucial when it comes to providing appropriate support to borrowers. These aspects include: 


  • Sense of Powerlessness: Financial stress can make borrowers feel powerless and trapped in their current situation. They may perceive their financial problems as insurmountable obstacles that they cannot control, especially as interest rates rise. Feelings of helplessness can easily spiral into intensifying feelings of frustration and despair or lead to heightened levels of anxiety that manifest in increased heart rates, restlessness, and sleep disturbances.

  • Strained Relationships: Financial stress can place a considerable strain on relationships, both with the borrower's family and with lenders. Interpersonal conflicts and deteriorating relationships can exacerbate emotional distress and further intensify the fight or flight response.

  • Emotional Overload: The accumulation of financial stressors, such as mounting debts, collection calls, or fears of foreclosure can result in emotional overload. People often experience a range of emotions, such as anger, sadness, guilt, and shame. These emotions can have a significant impact on their self-esteem, leading to a reluctance to seek help or discuss financial challenges.

Understanding the effects financial stress causes people and how they affect behaviour is the first step when it comes to building tailored and effective support.


Six principles borrowers want from their lenders


Next is to know what borrowers in such circumstances want from lenders. The six principles laid out below were developed using direct feedback taken from our customer research: 


  1. See borrowers as people, not a product
    People have lives that extend beyond the financial products they use. It is important to acknowledge borrowers as fully human individuals with unique situations. Conversations and interactions should reflect this reality. Instead of defining customers by their product type or financial situation, lenders should take into account their personal circumstances, goals, and challenges. By doing so, they can establish a more empathetic, personalised, and helpful relationship with customers.

    “When things became tough,  

    everything became more impersonal”


    Borrower Quote from Pepper's Customer Experience Research 2020

  2. Keep customers informed so they feel in control 

    As we noted above, financial stress can put a considerable strain on relationships with the borrower’s family and the lender. Timely responses and updates from lenders can contribute significantly to building a sense of confidence and support. A simple text or message that says “We’re still working on it” can provide reassurance, especially if things are taking longer than a borrower expects. Maintaining regular communication and keeping people informed is one way lenders can help borrowers feel more in control.

  3. Do what you say you are going to do 

    One of the most frustrating experiences for borrowers is when lenders fail to follow up or provide promised information. Fulfilling commitments and promptly getting back to customers builds trust. Additionally, providing people with open communication channels and easy ways to check the status of their accounts can enhance transparency and customer satisfaction.

  4. Take responsibility for customer understanding 

    Transparency alone is not enough. Lenders should strive to ensure that borrowers fully understand the terms, processes, and technical language associated with their financial products. Using complex jargon or terminology that people do not understand erodes trust and heightens uncertainty. Lenders should take responsibility for their customers’ understanding and explain technical terms in a clear and concise manner.

  5. Be proactive and share all available options 

    When people struggle financially, they expect lenders to be proactive in providing options and solutions. Lenders should leverage their data to identify borrowers who may be experiencing difficulties and offer assistance before it’s requested. Being proactive demonstrates genuine support and care and promotes better customer outcomes. Furthermore, lenders should be open with borrowers and take them through the options available and take ownership of any issues that arise. Keeping things hidden and/or blaming external factors erodes trust.

  6. Support and encourage progress 

    People who take steps to improve difficult situations should be acknowledged and supported. Lenders should recognize and communicate the progress made by borrowers, rather than solely focusing on negative aspects such as arrears. Providing positive feedback and incentives for partial payments or consistent efforts can motivate borrowers and instil a sense of progress, which increases confidence and makes a positive difference in how people feel.


These principles guide us at Pepper Advantage at all times, but they are particularly relevant now. Data from the UK’s Office of National Statistics shows that the most pressing issue facing the UK is the high cost of living, which 91% of people cited as a concern. Moreover, 62% said that their cost of living had increased compared with a month ago, while 47% said that their rent or mortgage payments had gone up in the last six months. 43% of people reported that it was very or somewhat difficult to afford rent or mortgage payments compared to 25% in June 2022.


This data speaks for itself. Nearly half of the UK is finding it difficult to pay for their homes, and it is reasonable to assume increased levels of financial stress under such conditions. Our research shows that understanding the customer experience through borrowers’ eyes – particularly during difficult times – is essential for lenders. Such a perspective can help them fully incorporate the reality customers face into their communications and allows them to question if their current approach could be improved. For example, could call centre scripts be updated? Do call agents need additional support as they work with more borrowers under pressure? Is access to key account information readily available to customers, and is that information easy for them to understand?


Ultimately, it pays to question every step of the customer journey through borrowers’ eyes and remember that we are all human beings who deserve compassionate support. Lenders who build this support into their customer engagements can contribute significantly to improving the journey, while providing better customer outcomes. With the Customer Duty Act coming into force in August, the burden is on mortgage providers to do exactly that. 





By Joanne Thrift,

Group Head of Customer and Brand