Mortgage fraud is almost as old as mortgages themselves, but advisers and brokers have warned the scammers are getting smarter than ever in their attempts.
With a cost of living crisis and ever-rising house prices comes a tendency to be a little flexible with the true nature of personal finances, while the rise of AI and software that can be used fraudulently can add to the potential risk of mortgage fraud.
Jeremy Lock, director of compliance at Access Financial Services, says: "The disproportionate house price to salary ratio is driving potential homeowners, who are unable to generate sufficient income, to attempt fraud as a method of obtaining a mortgage."
He pointed to 2024 research from Hamptons, which found the average time to save for a 15 per cent deposit was four years and nine months, and approximately 10 years for a single person.
This "shoots up" to 15 years and nine months if clients are trying to buy in London.
Clients may think that overstating earnings or presenting a higher income to brokers and lenders will allow them to borrow more, potentially meaning they need to save a smaller deposit.
Similarly, L&C Mortgages associate director David Hollingworth says economic and personal circumstances do tempt people to misrepresent their earnings.
He explains: "When the economy takes a turn and borrowers’ personal circumstances worsen, then it can account for a growth in cases where there’s an element of fraud.
"The rapid rise in interest rates and the broader cost of living crisis has inevitably put a strain on borrowers and will have made life that much harder."
Spotting the scam
But while mortgage advisers and lenders are wise to people overstating their earnings, and have put in place checks and balances to verify this information, some fraudsters go further.
According to John Phillips, chief executive of Spicerhaart and Just Mortgages, his team have spotted instances where very clever, but very fake, documentation has come through.
He says: "We have certainly seen a rise in fraud attempts in recent years, as have many of the lenders we work closely with. It comes in many forms."
Phillips said the company's in-house anti-fraud team has intercepted many examples of falsified payslips, usually for a fabricated job owned by a friend or family member.
"We’ve also seen examples where clients have manipulated a bank statement to change figures, claim employment or where there’s receipt of child benefit for example, but no mention of a child anywhere else in the application.
"We also see lots of examples of benefit fraud, where clients are getting universal credit that they’re not eligible for due to the level of their savings."
Lock also says he has seen mortgage customers "trying to manufacture documents such as payslips and bank statements".
Another recent problem that Access Financial Services has noted is where applicants 'stage' their income to fit lending requirements so that they appear to have a higher salary in the months immediately preceding their application.
