Why assisted voluntary sales are becoming an essential tool in mortgage risk management

Mortgage arrears remain an important consideration for lenders, even as the latest figures continue to show signs of improvement. FCA data for Q2 2026 shows that outstanding mortgage balances in arrears fell to £19.7bn, while possessions also decreased by 4.5% from the previous quarter.

For lenders, the challenge is not simply managing those numbers. It is deciding how and when to intervene when a customer is no longer able to sustain their mortgage, all while balancing customer outcomes, property values and the eventual recovery.

But as those figures show, it’s a challenge that lenders are really rising to, prioritising early intervention and proactive support, rather than last resort measures. Increasingly, mechanisms such as assisted voluntary sales (AVS) are playing a critical role in how lenders approach these cases.

Rather than just an alternative to repossession, AVS offers an early intervention tool which allows the lender to support the customer whilst agreeing a strategy to achieve the best sale price – keeping full control of the customer journey. In such cases, a lender will work with an asset manager to understand the full picture of the property and its value, before marketing the property and assisting the customer until the sale completes.

In our experience, we have seen examples of customers in considerable arrears still able to secure a surplus from the proceeds of the sale – allowing them to return to financial stability and move on with their lives. In scenarios such as this, the opportunity for a positive outcome for all parties is greatly increased.

As in most cases though, the key is timing. Early intervention protects options and value, and provides the best opportunity to address potential barriers before they become too difficult to resolve.

The focus on timing is particularly important as a significant number of customers approach the end of historically low fixed rate deals.

In 2021, the average effective interest rate on newly drawn mortgages was around 1.85%, driven by a historically-low Bank of England base rate of 0.1% for most of the year. Today, the market average hovers above 5%. That’s a significant jump. For customers whose circumstances have changed since taking out their mortgage, a higher monthly payment will only place additional pressure on already stretched finances.

Given the challenges we are seeing the wider economy and labour market too, lenders will continue to evolve their clear, proactive strategies for identifying and supporting customers who may be struggling.

AVS can form an important part of that strategy where a customer is no longer able to sustain their mortgage and other forms of forbearance are not viable. Engaging early gives the lender and customer more time to understand the options available, assess the property and determine whether a voluntary sale could provide a sustainable route out of financial difficulty.

The earlier that conversation takes place, the greater the opportunity to manage the process properly. It gives the customer time to prepare for the sale, while allowing the lender to work with an asset manager to understand the asset, establish its value and develop an appropriate marketing strategy.

That does not mean that an assisted sale is right in every scenario. Other forms of forbearance may be more suitable. Particularly where the property has been mistreated or is in a poor state of repair, the best course of action may be to repossess. In every case though, it should still be the ‘break glass’ moment, rather than the first resort.

But where an assisted sale is viable, keeping the customer involved and engaged in the sale can provide greater transparency and engagement than waiting until possession has become unavoidable. This is especially the case with leasehold properties and helping to navigate communication with management companies.

This approach is reliant on lenders having a clear view of their mortgage book and access to the right tools, expertise and information to make the assessment early. With the right intelligence, lenders are able to really understand value and risk across their entire mortgage book, act early and secure the best possible outcome for themselves, but most importantly, for the customer.

Working with a specialist asset management partner, lenders able to enhance intelligence they may already have with house price indexes through boots on the ground and eyes on every asset. An asset manager will be able to assess the property, its location, condition and any other regional or environmental factors to fully determine the property’s current state, potential value and best course of action.

As mortgage risk management becomes increasingly focused on early intervention and individual circumstances, AVS continues to play a vital role in every lender’s toolkit.

The key is knowing when it is appropriate, acting early enough to preserve options and having specialist property expertise to manage the process effectively from initial assessment through to completion.