Posted on August 10th, 2010 | Categories - House Prices
The value of mortgage fraud has almost quadrupled to £96 million during the first half of 2010 marking a 22-year high, according to KPMG’s Fraud Barometer. During the same period last year just 18 cases were reported at a value £24 million – the whole of 2009 saw cases totalling £77 million.
The half-year mortgage fraud figures account for over half of all fraud committed in the financial sector during this period.
KPMG said the boom in house prices experienced by the UK before the recession hit made it easier for people to commit mortgage fraud. It is only now that the crimes are being discovered and prosecutions made.
Hitesh Patel, partner at KPMG Forensic, said: “The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate”.
He continued: “This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud. Banks will be hoping that they have uncovered most of their fraudulent loans. But the trend remains upwards and it could be some time before we see the peak”.
The Financial Services Authority announced in July this year that self-certification mortgages will be banned to prevent people from taking up mortgages they cannot afford. The self certification model does not require home buyers to prove their earnings before taking up a mortgage and it was blamed by experts for creating a mass of borrowers who could not meet their mortgage repayments, which contributed to the economic downturn.