Up to 55% of Property Addresses in Lender Collateral Books Are Incorrect

Our analysts at TwentyCi have seen lender collateral books with address inaccuracies of up to 55%. It’s a rather shocking stat. How can you confidently verify borrower identities, assess risk, facilitate any form of communication, or even repossess a property without the correct address?

How confident are you in the health of your lending data?

Just like a farm won’t yield strong crops from poor seeds, your business can’t flourish without high-quality, reliable information. It’s imperative to invest in data enhancement to keep your records complete, consistent and actionable.

This article examines the business case for systematic address data quality management.

The Scale of the Problem

Poor data quality represents a material cost to UK business operations. Research by The Software Bureau estimates "dirty data" costs the UK economy £900 billion annually, representing approximately 20% of organisational revenue. Within this broader context, a single inaccurate customer record costs an organisation £81.11 annually.

For lending institutions, address inaccuracies create specific operational challenges:

• Failed communication with borrowers during critical collection periods
• Delayed possession proceedings due to incorrect property identification
• Manual intervention requirements for mortgage applications
• Compliance failures in customer due diligence processes
• Compromised fraud detection capabilities

Why data enhancement?

Data enhancement is the process of enriching raw data. You do so by merging it with additional information from various sources to improve its accuracy, completeness and overall value. The process often includes removing or correcting any corrupted, incorrect, irrelevant, poorly formatted, duplicate or incomplete data from a database. The additional data is usually provided by a third-party specialist in data enrichment.

The primary goals of data enrichment are:

1. Standardising data formats for consistency
2. Adding new context to make datasets more useful
3. Improving data accuracy and richness

Data enrichment goes beyond merely increasing the volume of data; it focuses on enhancing the value of the existing information to create a greater impact on business operations. The key characteristics of data quality are:

• Accuracy
• Completeness
• Consistency
• Reliability
• Timeliness/Currency
• Relevance
• Validity

What causes ‘poor data’?

Lenders are collecting more data than ever, from borrower information to property and transaction details. But the more data you gather, the greater the risk of inaccuracies creeping in.

Poor data, which is inaccurate or incomplete, can occur from human error, poor data integration, inconsistent formatting, system bugs or simply from being out of date. Combining multiple data sources can also often result in data duplication or mislabelled data. 

For lenders, where accurate data underpins every risk assessment, data enrichment is not optional; it’s imperative. Yet many still overlook this critical process, often viewing it as too time-consuming. Ignoring poor data quality is akin to closing the door on an overflowing wardrobe: the problem remains, even if it's out of sight. To derive meaningful insights and make sound decisions, your data must be accurate, complete and continually maintained.

Interesting data stats

• Dirty data costs the UK market a whopping £900 billion. (The Software Bureau)

• UK Finance's 2023 Fraud Report revealed £1.2 billion in combined consumer losses across all fraud types, with data quality playing a critical role in fraud prevention capabilities.

• 75% of businesses that improved their data quality exceeded their annual objectives. (Experian)

• 91% of business leaders found investing in data quality positively impacted business growth. (Experian)

• 57% of businesses use data to get better insight for decision-making. (Experian)

• 83% of businesses see data as essential for helping to form their strategy. (Experian)

• 90% of business leaders say improving data quality led to a positive impact on customer experience. (Experian)

Investing in data enhancement is essential for risk management, ensuring that you’re dealing with the correct property and that communications are sent to the right individuals. For financial institutions, data enhancement solutions can help cross-check declared property details with a verified database to prevent fraud and ensure compliance with anti-money laundering and financial crime regulations. Banks, lenders and investors rely on vast amounts of information to assess risks, identify opportunities and make informed decisions. With tight regulations and constant fraud risks, enhancing your data isn't just smart, it's a crucial investment. However, the effectiveness of any solution depends fundamentally on the quality and comprehensiveness of its underlying data sources.

A sound data enhancement solution

Advanced solutions like TwentyCi's AddressMaster service demonstrate this principle by using AddressBase Premium as its addressing foundation rather than the Postcode Address File (PAF). AddressMaster not only appends the missing address records in your dataset, but it also adds the UPRN* (unique property reference number) to ensure the property address of interest is 100% correct.

In addition to enriching your contacts by ensuring complete addresses with UPRNs, AddressMaster can also enhance each record by including various attributes using our DOMUS database. DOMUS holds over 350 property attributes of over 31 million UK residential properties. Updated daily, the property attributes include everything you’d need to know about the property make-up, from the number of bedrooms to whether it has a garage, driveway, swimming pool and more.

AddressMaster can even include the property value obtained from our highly accurate Automated Valuation Model (AVM). This can be used as a starting point for the valuation or in place of a human appraisal, saving the financial sector both time and money.

More enhanced risk assessment

DOMUS contains risk factors of properties, including roof problems, the presence of Japanese knotweed and evidence of mature trees close to the property, to name just a few. The database holds all this information about UK properties, and we can include this in your address enrichment.

Having information on the property age, flood risk, ground stability, heat stress, coastal erosion and flood risk is needed for both today and in the future to aid in better-informed decisions. For lenders, you can adjust the terms and pricing accordingly once you have a richer picture of a property’s risk level. It can also reduce mortgage defaults as the information can ensure properties are suitable security for loans. For insurers, you can price policies more accurately based on the risk factors from DOMUS, including subsidence risks, damp and structural problems. Financial bodies can also better advise clients based on the property condition and risks.

AddressMaster is ideal for larger portfolio management. Lenders can identify high-risk properties in their portfolio, whilst investors can make better decisions for buy-to-let property financing, excluding any that may be deemed to be high-risk.

Supporting Net Zero and ESG goals

DOMUS database provides EPC details for each property, including heat source, roof type, insulation, window type, solar panels and more. With the government’s goal of achieving Net Zero by 2050, green financing is becoming increasingly prevalent. Lenders and investors are prioritising energy-efficient homes and sustainable developments. Data on a property’s insulation, solar panels and EPC rating enables banks to promote green mortgages and ESG-compliant investments. Lenders can offer incentives such as lower mortgage rates or grants to homeowners who make energy-efficient upgrades or choose properties that have these attributes.

If you need a more stringent and standardised climate impact reporting, TwentyCi’s EcoVal360™ report helps lenders and valuers assess the potential climate risk factors within their portfolios. It highlights risks such as flooding, subsidence or energy inefficiency to safeguard your investments. Find out more here.

Conclusion

If you have a solid foundation of well-managed data, you’ll have a distinct advantage over your competitors. As well as minimising risks, clean data leads to reduced costs, improved decision-making and better customer experiences. Looking to enhance your loan collateral book data? Get in touch.