The Government is being urged to ensure lenders do not use the recent Bank of England (BoE) interest rate cut to boost profits at the expense of borrowers on standard variable rate (SVR) mortgages.

LegalTech firm, ME Group, suggested that when the bank took similar action after the 2008 global financial crisis, lenders had failed to cut rates for SVR mortgage holders by an equivalent amount.

This, the LegalTech firm has argued, was intended to shore up their profits and protect themselves from the huge drop in people taking our new mortgages.

ME Group CEO, Rob Cooper, commented: “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 also noted that even now, there are “hundreds of thousands” of homeowners currently paying more than they should for their mortgage.

He continued: “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.”

Cooper revealed ME Group had assessed mortgages for tens of thousands of customers – many of whom it classed as “financially vulnerable” and owed billions of pounds by lenders – and highlighted FCA figures from 2018 that estimated 150,000 people were mortgage prisoners.

“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,” Cooper added.

“What is vital is that borrowers are protected this time around so we don’t have another generation ripped off by greedy lenders.”

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