Buy-to-let lenders wary of fraud
Mortgage lenders have been reviewing their portfolios as rumours of fraudulent borrowing unsettle the buy-to-let sector.
The scale of the problem is not yet known but following the difficulties of Northern Rock, lenders are scrutinising their books to see where any potentially disastrous risks could lie.
Throughout the buy-to-let mortgage sector there are particularly high levels of anxiety about buy-to-let lending on new-build flats in regional cities across the UK.
Prices on these properties are decreasing and tenants are in short supply.
At the same time, lenders are concerned about cases that have come to light where property prices (against which loans have been advanced) have been inflated by the developer.
There have been transactions where the actual price paid for a property has been below the developer’s declared sale price.
Transactions of this type are fraudulent but are known to have taken place between investor syndicates and developers.
The police are currently investigating allegations of this nature with regard to the Thamesmead development in south-east London.
Matthew Wyles, a director of Nationwide, has warned that the Thamesmead scandal could possibly be the “tip of the iceberg”.
Nationwide has refused to offer landlord loans on new-build properties since 2005.
According to Mr Wyles, lenders instructing valuers to seek out all hidden deals between buyers and developers were “whistling in the wind”.
In his view, “off-contract transactions took place where not even solicitors knew of arrangements”.
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