A technology business chief has urged MPs to look more closely at the mis-selling of mortgages after his firm's system found more than 40 per cent of the mortgages it analysed could be due compensation.
The ME Group — which uses its tech system to create reports and analysis about mortgage products — predicted that banks and brokers could be on the hook for at least £3.6bn in compensation for mis-sold mortgages.
The firm essentially works as a claims-management technology business by creating reports for consumers which explain the likelihood a mortgage was mis-sold and the potential compensation due.
Through its work, the ME Group carried out assessments on mortgages for more than 43,000 UK households and found that more than 18,000 of them could be due compensation of more than £20,000 — adding up to £3.6bn of potentially owed cash.
According to ME Group, these customers were either mis-sold mortgages by brokers revisiting their accounts and 'churning' their business to an extent they are now over-indebted or have been overcharged as a result of mortgage lender practice during the 10-year period after the global financial crash.
In its response to the All Party Parliamentary Group’s inquiry on mortgage prisoners, the group urged politicians to move the issue up the agenda.
It specified a distinction between consumers whose mortgages were mis-sold — and therefore require compensation — and mortgage prisoners who were moved to new providers in loan book sales who are now trapped paying high rates.
According to ME Group, to help the former the government does not need to pass legislation or change regulation but needs to put the onus on regulators to tackle the issue head on.
The group's chief executive, Rob Cooper, said: "While the focus for this inquiry is the 150,000 estimated mortgage prisoners, we believe a significant proportion have also been either mis-sold their mortgage or have been overcharged, although many people who fall into these categories do not even know that they have been mis-sold."
Mr Cooper said once such consumers had been identified, they should be able to claim for compensation via the Financial Services Compensation Scheme and the Financial Ombudsman Service.
He added: "The government must encourage regulatory authorities to move the mortgage mis-selling issue up their agenda, and to build internal capability to examine these types of claim and make settlement decisions much more quickly than is currently the case.
"There are families across Britain who face financial trouble as a direct result of poorly designed financial services, yet awareness among the most financially vulnerable of the unfairness and overcharging, and a decline in the inclination to complain, means they fail to receive the remediation they deserve."
But Shaun Church, director of Private Finance, said he struggled to see how such a large percentage of mortgages would have been mis-sold.
He said: "After the crash, the market clamped up completely and the idea mortgages were being 'over-sold' at this time doesn't make sense. High loan-to-value and loan-to-income borrowing stopped and lenders became very strict.