The evolving mortgage fraud threat and how intermediaries can stay one step ahead – Thompson

This sharp rise represents one of the largest annual increases ever observed by leading fraud prevention service Cifas, highlighting the growing scale and complexity of fraud in the UK. Cifas members collectively recorded a new case to the NFD every two minutes, preventing over £2.1bn in potential losses. Further Cifas research in early 2024 revealed that one in six UK adults admitted they, or someone they know, had misled a mortgage provider about their income in order to buy their dream home.

As technology advances and fraudsters become more sophisticated, tackling mortgage fraud is becoming an even greater challenge for both lenders and intermediaries.

The changing face of mortgage fraud

Mortgage fraud is not one single threat but a spectrum of risks.

• Application fraud – where applicants deliberately provide false information about income, employment, or residency to secure a loan they wouldn’t otherwise qualify for.
• Identity misuse – when personal details are stolen and used to apply for a mortgage without the individual’s knowledge.
• Money laundering – where property transactions are used to ‘clean’ illegally obtained funds.
• Scheme abuse – for example, buying a property with the intention of using it for purposes other than those stated.

What makes mortgage fraud particularly insidious is how plausible it can appear. Fraudsters often mirror the legitimate processes lenders and advisers follow, using high-quality forged documents, fabricated digital trails, and even synthetic identities created from a mix of genuine and fake personal data.

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Technology is a double-edged sword. While digital verification tools and open banking have improved fraud detection, they’ve also given criminals new ways to create convincing digital evidence.

So, what can intermediaries do to combat this threat?

As always, the devil is in the detail, which makes the fact find a perfect starting point for spotting potential red flags early in the process.

Three things to look for on bank statements

1. Visual inconsistencies
   • Check that fonts, columns, and spacing are consistent throughout.
   • Watch for pixelated logos, misaligned figures, typos, or punctuation errors – all possible signs of forgery.
2. Figures that don’t add up
   • Ensure credits and debits affect the balance correctly.
   • If the balance stays the same (or drops) after a credit, something’s not right.
3. Unusual spending patterns
   • Do transactions align with the applicant’s profile? For example, someone earning £80,000 per year would likely have regular mortgage, insurance, or childcare-related outgoings.
   • Look for signs of staged income, such as large one-off deposits or an unexplained balance build-up before an application.

Follow up: If more than one of these indicators appear, it’s worth doing further checks to verify authenticity.

Three things to look for on payslips

1. Tax and National Insurance indicators
   • A payslip that only shows deductions for tax and National Insurance, with no pension contribution, may warrant closer scrutiny – particularly for higher earners.
2. Low or inconsistent employee numbers
   • A large or well-established company issuing payslips with very low employee numbers (under 20) can be suspicious.
   • Conversely, a small or new firm with very high employee numbers may also signal fabrication.
3. Consistent payments
   • Most payslips show small variations month to month, even if only by a few pence. Identical figures across several months can indicate falsified documents.

Follow up: Use independent verification such as contacting the employer directly, checking company registration details, or requesting bank statements that align with payslip deposits.

Building a culture of vigilance

Fraud prevention isn’t just a compliance exercise, it’s about protecting your clients, your business, and the wider industry. Training teams regularly on fraud related trends, using secure document verification tools, and maintaining clear escalation processes can all make a difference.

Above all, trust your instincts. If something doesn’t feel right, it probably isn’t. As the first line of defence, intermediaries play a vital role in protecting the integrity of the mortgage market, and there’s no room for complacency in the face of an ever-evolving threat. That’s why professional instinct and due diligence have never been more valuable, and the ability to question, probe, and verify remains every intermediary’s greatest defence.