BBC exposes UK sub-prime fraud


The BBC’s Panorama programme, broadcast last night, claims that sub-prime mortgage lending in the UK accounts for over 70% of all repossessions.

In the last three months investigators working on the programme conducted a survey of more than 7,000 court hearings and found that lenders specialising in sub-prime mortgages, or offering them as part of their business, were involved in over 70% of all repossession cases.

A repossession hearing does not necessarily mean that a house will be repossessed, as the lender and the borrower can agree a settlement.

The UK sub-prime mortgage sector, which lends at high interest rates to people with poor credit histories, has been experiencing strong growth and now accounts for around 8% of the total mortgage market.

The Panorama investigation exposed cases of council tenants on state benefits being encouraged to significantly exaggerate their incomes, in order to buy their homes under the right-to-buy scheme.

Instances of mortgages being granted when it was clear that they were unaffordable were also exposed.

Mis-selling mortgages in this way has wide implications for the property market because banks and building societies involved in sub-prime lending sell the mortgages on to investors.

During the programme the case was made that those involved in mis-selling the mortgages did so in the knowledge that the debt would be sold on before the borrower defaulted on his or her loan.

If this kind of practice has been widespread, a large increase in repossessions is likely, which could destabilise the UK property market.

The Council for Mortgage Lenders has admitted that little is currently known about the extent of repossessions among sub-prime borrowers in the UK.

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