The number of fraudulent cases in Q3 declined to 25 in every 10,000 following three consecutive quarters where around 30 in every 10,000 applications were fraudulent. However, the Q3 figure has increased from the 16 cases which were identified in Q3 2006.

Experian uses two fraud prevention systems, Hunter and Detect, which enable lenders to cross-match mortgage applications against 500 million consumer records in Experian’s database.

The systems also cross-match applications against over 100 million previous application records to spot anomalies which are potentially indicative of fraud.

Nick Mothershaw, director of fraud and identity solutions at Experian, said mortgage fraud had increased since the pre-credit crunch days of 2006 because people were taking more risks on their applications.

He explained: “Fraud poses an increasing risk to the UK’s financial services sector and the nature of the risk is continually evolving.”

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Ray Boulger, senior technical manager at John Charcol, said it believed that lenders had finally realised that they needed to scrutinise documentation carefully.

He said: “Lenders are becoming more diligent in vetting applications in a market where lending criteria has tightened and funding is constrained. However, there is still a fear that attempted fraud may continue if difficult economic conditions persist, so detection systems must be improved.”

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: “Ultimately, any fraud that takes place results in significant losses for the lender, and these costs are passed on in the form of higher mortgage rates for borrowers, so fraud must be stamped out.”