ME Group, which solves legal disputes using technology, has called for the government to ensure that lenders do not use the recent Bank of England interest-rate cut to boost profits at the expense of borrowers on standard variable rate (SVR) mortgages.
ME Group CEO Rob Cooper said that when the Bank took similar action after the 2008 global financial crisis, lenders failed to cut rates for SVR mortgage holders by an equivalent amount. This, he said, was intended to shore up their profits and protect themselves from the huge drop in people taking our new mortgages.
Cooper said: “Overcharging could happen again during the Covid-19 crisis, especially as the government has now stepped in to temporarily close down the housing market. This means new business for lenders will be almost non-existent.
“It is vital that regulators closely scrutinise the interest-rate decisions taken by lenders and step in to stop any financial profiteering, which is subject to fairness tests of EU consumer law.”
Cooper argues that, even now, there are hundreds of thousands of homeowners currently paying more than they should for their mortgage.
He added: “What’s even more worrying is that many of these are mortgage prisoners who have been prevented by lenders from switching provider. They will be stuck with punitively high interest payments with no means of moving their mortgage to another lender.”
In 2018, the FCA estimated that 150,000 people are currently mortgage prisoners.
Cooper said ME Group has assessed mortgages for tens of thousands of customers, many of whom are classed as financially vulnerable, and who are owed £billions by lenders.
“We have made the Financial Ombudsman Service and the Financial Services Compensation Scheme aware of the scandal, but the wheels move very slowly and it could be many months before these cases are attended to.
“What is vital is that borrowers are protected this time around so we don’t have another generation ripped off by greedy lenders,” he added.