Advisers have been urged to 'know your customer' as research showed the number of fraudulent mortgage applications submitted in the UK increased by 5 per cent since the end of last year.
Data published by fraud prevention service Cifas yesterday (September 24), showed mortgage fraud had seen a 5 per cent increase in the first six months of 2019 compared with the second half of 2018.
Fraud by production of a false document increased by 14 per cent, according to the research, while the number of altered documents submitted for a mortgage rose 32 per cent.
Meanwhile identity fraud in mortgage products dropped by 26 per cent while ‘facility takeover’ — where a bank account is hijacked by a fraudster — fell by 25 per cent.
The findings came as Cifas research showed 13 per cent of British adults believed it was ‘reasonable’ to exaggerate income on a mortgage application.
Nearly half of those caught committing application fraud (45 per cent) were aged between 31 and 40 years old, closely followed by those aged between 41 and 50.
The findings also showed the West Midlands saw the highest increase in fraudulent mortgage applications at 43 per cent whereas cases in the North East rose by a third.
Mike Haley, chief executive at Cifas, said: “It’s easy to assume that making exaggerations to improve the chances of your mortgage being approved is harmless, but the reality is that this is fraud and the consequences can be very serious.
“Mortgage providers carry out rigorous checks, and so exaggerating your income or withholding any change of circumstances could result in it being harder to obtain financial products in the future such as mortgages and loans.
“In more serious cases, this kind of fraud could result in a hefty fine or a prison sentence, or the possibility of losing your home.”
Policy manager for the Building Societies Association, James O’Sullivan, said it was essential applicants were honest about their personal circumstances as a mortgage was a “significant financial commitment”.
He added: “There are many risks inherent in being less than honest, not least that the borrower finds themselves unable to pay because a realistic affordability assessment was not possible or that, when caught, offenders struggle to get future credit.
“It is far from being a victimless crime and is something that lenders take rigorous action on.”
Martin Cheek, managing director at anti-money laundering firm SmartSearch, said: “Mortgage applications may not traditionally be the area you’d associate with fraud and this significant increase shows that it is a vulnerable sector of the market.
“While lenders and advisers will never stop people trying to commit fraud, they can stop them succeeding by ensuring their ‘know your customer’ processes are fit for purpose.”
Mr Cheek thought banks and other lenders should be looking to switch to electronic verification in an effort to put a stop to mortgage fraud.
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