Is fraud propping up house prices ?

silvercar

DervProf wrote: »

Indeed, there is no change to the shortage of housing, but there is a change to the amount of money that some of those that are buying property would be able to pay. You might argue that the number of people obtaining larger mortgages due to "suspicious" practices is small, I am suggesting that it may well be that the number is larger than many people think. The thing is with fraud (or whatever you want to call obtaining a larger mortgage than you would if you were being honest) is that people who commit or take part in the fraud are not often going to admit it. Yesterday, we had a glimpse of what may well be going on "behind closed doors" via a post made by a mortgage advisor.

By a similar argument you could say that rents were being held down by the increase in the rental pool created by council tenants illegally renting out their council home.

We know it goes on, we don't know the size of the problem and therefore we don't know it's effect on rents.

DervProf

HAMISH_MCTAVISH wrote: »

But I also don't have a problem with people seeking to legally minimise their tax obligations, or doing a bit of extra work on the side to make ends meet. You'll never stop that sort of activity, and I'm not entirely convinced it's even worth worrying about.

Our "resident" mortgage broker told us that everyday he meets people with more wealth than officially declared. If he's a typical mortgage broker, then it may well be that the number of people "on the fiddle" isn't exactly tiny.

DervProf

silvercar wrote: »

By a similar argument you could say that rents were being held down by the increase in the rental pool created by council tenants illegally renting out their council home.

We know it goes on, we don't know the size of the problem and therefore we don't know it's effect on rents.

Agreed.

Maybe if both problems were sorted out (sub letting and fraudulent mortgage applications), the two problems would cancel each other out. I suspect that mortgage fraud is probably more common than sub letting, but we haven't got much evidence to go on, as naturally people involved in such activities won't usually admit to it on a public forum.

DervProf

HAMISH_MCTAVISH wrote: »

You seem to be calling for banks or the government to do more to force people to pay more in tax, not moonlight in second jobs, earn less money, etc. You want to "level the playing field" by dragging everyone down to the lowest common denominator.

And that "lowest common denominator" is the one where everyone plays within the law. As far as forcing people to pay more tax is concerned, I would hope that honest individuals would pay less tax if those who were evading tax were brought to book. A bit like if insurance companies were to stamp out fraudulent car accident claims, our premiums might be a bit lower.

silvercar

DervProf wrote: »

Our "resident" mortgage broker told us that everyday he meets people with more wealth than officially declared. If he's a typical mortgage broker, then it may well be that the number of people "on the fiddle" isn't exactly tiny.

Either they could be earning undeclared income or they could be inflating their earnings to secure a mortgage.

One is tax evasion, one is fraud. Both wrong.

chewmylegoff

The national fraud authority estimates that mortgage fraud costs the economy £1 billion a year- I presume that is the total that banks lose as a result of (i) fraudsters selling a property to themselves, getting a mortgage and legging disappearing with the cash; and (ii) people inflating their income and then being unable to repay the mortgage.

And I expect it includes commercial mortgage fraud as well as residential.

Total residential mortgage lending is £1,200 billion. So it doesnt look like mortgage fraud is particularly significant when compared to the size of the market.

Graham_Devon

chewmylegoff wrote: »

The national fraud authority estimates that mortgage fraud costs the economy £1 billion a year- I presume that is the total that banks lose as a result of (i) fraudsters selling a property to themselves, getting a mortgage and legging disappearing with the cash; and (ii) people inflating their income and then being unable to repay the mortgage.

And I expect it includes commercial mortgage fraud as well as residential.

Total residential mortgage lending is £1,200 billion. So it doesnt look like mortgage fraud is particularly significant when compared to the size of the market.

Ahhh, but thats £1bn for the known fraud. The fraud thats caught out for whatever reason.

julieq

No, it's an estimate of the total fraud. Known fraud isn't estimated, it's quantified.

And it isn't a big deal to the totals. You don't need anything more than normal supply and demand to sustain UK prices at current levels.

macaque_2

silvercar wrote: »

By a similar argument you could say that rents were being held down by the increase in the rental pool created by council tenants illegally renting out their council home.

We know it goes on, we don't know the size of the problem and therefore we don't know it's effect on rents.

The council rents a place out at X an then the tenant then sublets it at X + Y. And this is holding down rents?

chewmylegoff

Graham_Devon wrote: »

Ahhh, but thats £1bn for the known fraud. The fraud thats caught out for whatever reason.

No it's the estimate of the total fraud extrapolated from the known fraud.