The Financial Services Authority has expressed its concerns about the fraudulent use of buy-to-let mortgages.
The City watchdog warned in its annual Risks Review that people who really want ordinary residential mortgages are instead trying to get buy-to-let mortgages because the latter are not regulated. Their applications are helped by advisers.
An applicant for an ordinary residential mortgage is liable to various checks and restrictions, which are not the same as those in place for buy-to-let borrowers.
The FSA said that the fraudulent use of buy-to-let mortgages could increase because some potential borrowers had been shut out by the much greater restrictions now in place.
It said: “We are seeing anecdotal evidence of unregulated buy-to-let mortgages being used fraudulently as a replacement for regulated residential mortgage contracts, as borrowers and intermediaries seek to circumvent more stringent income and affordability checks.”
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