The Intermediary –- June 2026 - Flipbook - Page 60
T E C H N O L O GY
Opinion
Tackling the back
book blind spot
F
or years, mortgage
lenders have invested
heavily in assessing
risk at the point of
origination. Affordability
checks, property
valuations, environmental, social,
and governance (ESG) considerations
and stress-testing are now embedded
into front-book lending decisions.
Yet, while significant aention is
paid to the quality of new lending,
many institutions still have only
limited visibility into how risk
is evolving across their existing
portfolios. That blind spot is becoming
increasingly difficult to ignore.
The UK’s residential
property market is now worth
approximately £11tn, one of the
largest concentrations of collateral
exposure in the economy. But the
environmental, structural and market
risks are evolving, and in many
cases, accelerating.
For lenders, the challenge is no
longer simply understanding the
condition of a property at completion.
It is understanding the position of
that property today, and how that
risk profile may shi over the life of
the mortgage.
Why it matters
Historically, many lenders have
focused ESG and climate risk
strategies primarily on new lending.
That approach made sense when
regulation and reporting obligations
were less mature. But the spotlight is
increasingly turning towards existing
mortgage books.
Recent increases in mortgage rates
and the cost of living have slowed the
pace of capital repayment, leaving
borrowers in higher loan-to-value
(LTV) positions for longer.
At the same time, the growing
prevalence of extended mortgage
terms – with more than 30 lenders
now offering terms of up to 40 years
– means equity accumulation is
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The Intermediary | June 2026
taking significantly longer than under
traditional repayment structures.
The result is a greater concentration
of collateral risk remaining on lender
balance sheets for extended periods.
That creates an important question
for risk teams: how many lenders
truly understand how their existing
security values, climate exposures and
saleability profiles have changed since
the original loan completed?
The scale of risk
The data suggests that the scale of the
issue is substantial. Of the UK’s £11tn
residential asset base, around £478bn
of property is currently considered
at high risk of flooding – projected to
rise to £587bn by 2055. £662bn is at
high risk of subsidence, and this could
increase dramatically to £3.4tn by
2055. Properties at high risk of coastal
erosion currently account for around
£2bn, and are expected to double over
the same period.
These are not distant theoretical
concerns. They represent real and
measurable risks to collateral quality,
insurance costs, liquidity and future
lending decisions.
Climate exposure is only part of
the picture. In a more uncertain
housing market, lenders must also
consider whether assets can be
liquidated effectively if required. A
property’s ability to sell, particularly
at higher price points, is becoming an
increasingly significant component of
portfolio risk.
Current data indicates that more
than 44% of UK properties listed for
sale with estate agents are not selling.
Just a few months earlier, in February,
that figure stood at 38%. That
deterioration maers. A property that
cannot easily transact becomes a more
complex security asset, particularly in
stressed market conditions.
Static snapshots
Traditionally, lenders have relied on
periodic portfolio reviews, postcode-
COLIN BRADSHAW
is CEO at TwentyCi
level analysis or outdated valuation
models to monitor exposure. But these
approaches leave critical gaps.
Modern risk management requires
a more granular understanding of
individual properties, combining
accurate, frequently refreshed
valuations with detailed property
aributes, climate intelligence and
energy performance data to create a
living view of collateral quality.
This is where integrated property
intelligence is strategically important.
By combining automated valuations
with current and future climate
exposure data, lenders can gain a
clearer understanding of how risk is
evolving, particularly within higherrisk segments.
Equally important is the ability to
assess liquidity and marketability
using real-time property history and
listing intelligence, to identify assets
that may become harder to transact in
a changing market.
Strategic advantage
Lenders are moving beyond highlevel disclosure exercises towards
more operational risk management.
The institutions best positioned for
this shi will be those that treat
portfolio intelligence not simply as
a compliance requirement, but a
strategic capability.
Understanding how collateral risk
changes over time allows lenders to
make beer decisions around capital
allocation, portfolio resilience,
customer engagement and future
lending appetite.
The back book can no longer be
treated as a static portfolio of past
lending decisions. Risk is dynamic,
and visibility into the current
condition of collateral assets is
becoming essential. ●
