Legal Recruitment from Ten-Percent Legal

Friday, November 14, 2008

Bradford and Bingley gets nationalised – effect on housing market

What fault can be placed at the door of the banks and building societies who are facing serious collapse at present?

Bradford & Bingley Building Society were nationalised because of the amount of potentially dodgy mortgage debt they have and concerns about their ability to keep trading when the capital that was supporting them has gone.

There has been a lot of blame on the banks and the building societies for this situation, but one of the things that has not come up in this is the buy to let applicants themselves.

Five years ago, I was talking to someone who had entered the buy to let market who had purchased their first flat with a genuine set of details, before moving on and purchasing countless other properties and flats using what can only be described as fraudulent documents and making statements that were clearly not true and hence, obtained in a pecuniary advantage by deception. The key to all of this was mainly that they would make the application for the first property and then use the same information to make an application for a second one without mentioning that they already have the first one, or alternatively creating sources of income that did not exist, or alternatively to that, claiming that they lived in each of the properties that they had the mortgage on.

Whilst the banks and building societies have to be blamed in part for this, in that sufficient checks were clearly not made to make sure that the information being provided was true, it is clear that there has been rather a lot of fraud committed by various buy to let landlords in respect of their mortgage applications to purchase the properties they’re letting out in the first place.

It has clearly been a bit of a gold rush for some people but it must be of great concern to a lot of buy to let landlords at the moment to see how they are going to pay their mortgages if the cost of rental property is not increasing, yet the cost of mortgages is going up rather dramatically.

Perhaps in the climate we are currently in buy to let mortgages will suddenly become a thing of the past, apart from when there is solid evidence to back them up.

The same applies with self certification mortgages, which are very useful if you are self employed, but are left wide open to potential fraud and also people taking on more liability than they actually have the ability to pay for.

Let’s just hope that the current position does not affect conveyancing and similar markets for too many months to come.

Jonathan Fagan is Managing Director of Ten Percent Legal Recruitment, he also regularly writes and commentates on the state of the legal job market. You can contact him at