According to the BBC’s Panorama programme, buyers and lenders have been the target of widespread fraud, with claims that sale prices are being inflated on the Land Registry index, particularly with new build properties.
The programme also claimed that lenders could be duped into lending more than was necessary to the borrower, with many being left with negative equity when they were unable to sell at the price they paid.
It was claimed that Land Registry house prices had been inaccurate for years, and in some cases the valuers have been arrested for fraudulent behaviour.
Speaking on the programme, the Council of Mortgage Lenders (CML) said that a slowing market could tempt some developers into offering greater ‘incentives’ to potential buyers.
This included one property management firm paying a deposit of 11 per cent – around £33,000 – which calculated as the difference between the price and the Land Registry index price.
Bernard Clarke, communications manager at the CML, commented: “Buyers may find themselves with a mortgage worth more than the property’s value, while lenders may find themselves exposed to fraud and the risk of loss.”
The organisation also called for developers to sign up for the codes of practice that currently applied to solicitors and valuers.
Paul Walshe, head of lender services at Moore Blatch, said: “There’s greater uncertainty on new build properties as there is more tenant demand for residential property, but on all new builds developers have a long lead time so the market changes in that extended period.
"However, putting the wrong figure on a property does not do a good service to the lender.”
