Legaltech business ME Group has called for the government to ensure that lenders do not use the recent interest rate cut to boost profits at the expense of borrowers on standard variable rate (SVR) mortgages.
Rob Cooper, chief executive at ME Group, claims that when similar action was taken after the 2008 global financial crisis, lenders failed to cut rates for SVR mortgage holders by an equivalent amount.
This action was intended to up their profits and protect lenders from a drop in taking new mortgages, Cooper claims.
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.
“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.
The ME Group has assessed mortgages for tens of thousands of customers, many of whom are classed as financially vulnerable.
Cooper added: “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.”