Is Standard Variable Rate The New PPI Scandal

Published / Last Updated on 05/12/2018

ME Group, a legal tech company, is launching a TV advert due to be aired on Wednesday urging customers who had/have taken a standard variable rate (SVR) mortgage, voluntarily or with ‘no option but to do so’, as they may be owed money and potentially costing mortgage companies billions of pounds compensation.

So far, ME has reviewed 20,000 mortgages and claims that some borrowers have already been identified to potentially receive five-figure pay-outs.

It is rumoured that the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) had been made aware of this a few months ago and will be having meetings with ME Group officials and members of Parliament to discuss potential remedies.

ME Group will possibly benefit financially by charging a fixed fee to customers for using their legal service in assessing their claims. When speaking to a leading news team they said “There have been millions of UK homeowners paying too much for their mortgage and not being able to switch lenders”.

Comment

The world of the SVR mortgage is opaque to say the least.  It appears to us, even as advisers, as a ‘smoke and mirrors’ exercise designed to hide from consumers how lenders set their SVR.  We get that lenders borrow money either from other banks, the Bank of England or savers at their bank and will have borrowed at different rates to other lenders, hence the wide discrepancy in SVRs.  The reality is that the FCA/Government should have set a framework years ago to establish how SVR should be calculated and how it is then explained and published for consumers and advisers alike.

Another PPI mis-selling scandal?  Possibly, alongside interest only mortgages?  Reality check:  Claims companies cease to exist without something to claim for.  It will be interesting when claims companies come within the remit of the FCA and have to comply with the same standards of practice that financial services companies do.  The number of false PPI claims, ignoring the legitimate ones, has wasted £billions.  When will the FCA or the Ministry of Justice send the bills for dealing with fraudulent claims to those same claims management companies that created many of them.

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