In an investigation which has not only shocked the Financial Service Authority (FSA), but the industry as a whole, a recent BBC report has shown that a significant number of UK sub-prime mortgage brokers have willingly encouraged customers to overstate their wages.  By overstating their income the customers will have been offered larger loans, ones which many just cannot afford to finance.  This is yet another element to the financial market which has many experts worried.

Apart from the fact that the housing market has turned down (confirmed by today’s announcement from Barratt Developments), there seem to be many home owners out there who may never have been in a  position to fulfil their mortgage obligations, even prior to the fall back in prices.  While these customers will take a while to work their way through the system, there are again real concerns about the UK sub-prime mortgage market.

When you consider that the credit lines for the sub-prime sector have all but dried up, it is a little surprising that there have been no major collapses as yet.  However, this can surely only be a matter of time, especially in the light of the BBC report.  If the sector were to collapse, it also begs the question “Would the authorities intervene as they did with Northern Rock?”.  Highly unlikely, but then who would have thought the Northern Rock would be on their knees in such a short space of time.

Thankfully the FSA have acted swiftly on the report findings and a number of mortgage licenses have been revoked, but were the BBC lucky enough to catch all of the rogue mortgage brokers - very very unlikely!