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Concern at BTL fraud rise to beat affordability checks

The FSA believes there is an increasing risk of borrowers and mortgage intermediaries using buy-to-let mortgages fraudulently to get around the tougher affordability checks required for residential mortgages.

The buy-to-let market is currently unregulated. The FSA has said previously it sees the benefits in regulating the sector but the Government is yet to make a decision on this.

The regulator’s retail conduct risk outlook, published this week, says: “We are seeing anecdotal evidence of unregulated buy-to-let mortgages being used fraudulently as a replacement for regulated mortgage contracts as borrowers and intermediaries seek to circumvent more stringent income and affordability checks. These instances of misconduct could increase.”

The FSA says this is likely in light of tighter controls around self-certification mortgages.

But Chadney Bulgin mortgage partner Jonathan Clark says but-to-let mortgages are not necessarily easier to secure than residential mortgages as loan-to-value ratios are often around 75 per cent.

He says: “Some buy-to-let lenders have no minimum income requirements and that could be abused but I have seen no sign of it. The Government should allow the FSA to regulate the buy-to-let market.”

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