Poor Financial Literacy Amidst the UK's Mortgage Crisis

The UK's mortgage crisis has taken a turn for the worse, with major lenders reducing interest rates on new fixed mortgages. However, the cost of new deals remains drastically higher than what many Brits have previously experienced. This article explores the impact of poor financial literacy on the younger generation and how AI can be used to break the cycle of financial exclusion.

Poor Financial Literacy Amidst the UK’s Mortgage Crisis

The UK’s mortgage crisis has taken a turn for the worse, with major lenders such as Barclays, HSBC, and TSB reducing their interest rates on new fixed mortgages. While this may seem like a glimmer of hope for borrowers, the cost of new deals remains drastically higher than what many Brits have previously experienced.

Mortgage Crisis

The latest industry data has revealed a substantial rise in the number of homeowners struggling with repayments, with mortgage possession claims in England and Wales up by 28% in the first quarter, compared to the same period last year. This has led to a substantial rise in the number of homeowners struggling with repayments.

“The consequences of poor financial literacy can be detrimental, leading to a cycle of shame and stigma.” - Eligible

According to exclusive data from Eligible, the legacy of poor financial education in schools has led to young adults reporting themselves as the most vulnerable generation amidst the ongoing cost-of-living crisis. Almost one-quarter of 18-24-year-olds feel confused by the correspondence they receive from their banks, far above the national average of 12%.

Financial Literacy

The advent of new technology, particularly artificial intelligence, can allow banks to “break the cycle” of financial exclusion, through communicating with customers on an unprecedentedly personal level - tailoring their communication style to the unique needs of customers from a variety of backgrounds. The overarching aim being the facilitation of a proactive, two-way communication between banks and their customer base.

AI can be used to detect how well people understand their financial product and use this data to spot vulnerable customers in order to better educate and support them. AI has the power to transform customer support from a reactive relationship to a proactive one. Instead of banks providing support only when the customer asks for it, AI can detect those who are likely to need assistance and proactively engage with them, fostering education and active dialogue.

AI in Finance

The consequences of poor financial literacy can be detrimental, leading to a cycle of shame and stigma. It is essential for banks to take a proactive approach in educating and supporting their customers, particularly the younger generation, to ensure a more financially literate society.