Mortgage fraud continues to rise

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Today’s blog offering comes courtesy of Darren Beach from Experian.  Our thanks to Darren and James Jones (Twitter: @ExperianJames) for their input in getting this great piece together, we really hope they will be writing for us on a regular basis…

Times are tough in the mortgage market, and people will often go to all sorts of lengths to get a mortgage nowadays – including resorting to making fraudulent applications.

It was revealed this week that fraudulent applications for mortgages increased by eight per cent in 2011 - the fifth year in a row in which the rate of mortgage fraud has increased – as financial pressure leads people to attempt to hide a poor credit history and give false information about their income.

Experian’s Fraud Index[1] reports that 34 in every 10,000 applications for mortgages were found to be fraudulent in 2011, compared to just 15 in every 10,000 in 2006.

The vast majority of those – 93 per cent – were due to individuals misrepresenting their personal information on their application. In the main these first-party frauds involved people lying about their employment status, or about their financial status, in order for them to get accepted for the mortgage deal they wanted.

However it also covered people who made efforts to hide the fact that they had a poor credit history.  The type of people who resort to this kind of fraud can range from young, well-educated professionals to middle-aged skilled workers, as well as younger, less well-educated individuals living in small towns.

Overall, there was a 4% increase in financial services application fraud, including rises in insurance and current account fraud, according to Experian’s research. Nick Mothershaw, UK&I director of identity & fraud at Experian, said: “This kind of fraud tends to originate from financially stressed segments of society.”

The figures come at a time when several leading mortgage providers are tightening their conditions for lending, due partly to pressure from the FSA (Financial Services Authority) to ensure that potential customers are encouraged to borrow only what they can afford. 

Some lenders are also increasing the cost of their mortgage deals, meaning that many borrowers on variable rates are finding that their monthly costs have risen. [2]

In addition, some borrowers on interest-only deals are being forced to move to repayment mortgages, which may leave many in a position where they are unable to remortgage.[3]

Having a good credit history is vital if you are looking for a good mortgage deal. Look at your credit report, which lists your credit accounts and repayment record. It gives you a snapshot of what you owe and how well you are coping – if you’re already overstretched, there may be work to do before you look for a mortgage or remortgage.

If you have any further questions try the Ask James section on the Experian website or contact us.  

[1] The Fraud Index was compiled using information from the National Hunter and Insurance Hunter fraud prevention systems, which Experian manages on behalf of its clients.