Mortgage scams you need to be aware of

Higher interest rates have led to increasing numbers of mortgage scams, according to a recent report. At the same time, Lloyds Bank says that ‘advance fee’ scams rose 19 per cent in 2023. 

As well as advance fee scams, there are a growing number of other fraudulent schemes that buyers need to know about.

Whether you’re a first-time buyer or have bought and sold many homes, it’s easy to be caught out. Scams are rising and becoming more sophisticated. UK Finance reports a record amount of purchase fraud last year. It says £85.9m was lost to scammers in 2023 – the highest amount ever recorded.

So what mortgage scams are there, and how should you keep yourself safe? 

Mortgage scams to be aware of 

There are many scams you need to be aware of when it comes to personal finance. Some clearly ring alarm bells, while others sound genuine. We cannot possibly cover every mortgage scam as they change regularly and new ones appear by the day. 

Generally, fraudsters pose as genuine companies by phoning or emailing you. They want your money or your personal details to take your cash. Some might demand information on the first call. But many fraudsters have become even more cunning and know more people are suspicious about giving their details. Instead, they’ll make a few calls before asking for details. In all cases, their original call will have been out of the blue.

Here, we cover the most popular fraudulent activities in the mortgage market. 

Advance fee scams

These fraudsters create fake companies or copy names from genuine mortgage lenders. You can see whether they’re genuine by checking the FCA’s website.

With these scams, fraudsters want you to pay upfront for services before they provide anything. Often, it’s on the first call but it might be the second or third to lull you into believing they are real.

Usually, they will say the payment is for credit checks, to pay for legal work or information to be released. 

But mortgage fees are usually only levied once the mortgage application is accepted. So be suspicious about paying for anything before receiving services. 

With upfront fees you are asked to give your bank details. Once paid, fraudsters will ask for more to cover other ‘fees’. They then disappear and you’re out of pocket. In some cases, they will use your details and empty your account. Then their phones will be disconnected.

Be careful about pop-up ads and posts on social media for loans and instant mortgages. While some may be genuine, be wary of any that ask for upfront fees.

Deposit fraud

In these scams, organised criminals intercept communication between homebuyers and solicitors or conveyancers on completion day. By impersonating the homebuyer or solicitor, they can redirect funds for the deposit into a fraudulent account.

This scam is often known as ‘Friday afternoon fraud’ because that’s usually the day for completion. But it can happen on any day, of course.

Banks suggest using Chaps (Clearing House Automated Payment System) when paying your deposit. Conveyancers and solicitors should provide their bank details at the start of the process. So only use those details when it comes to paying your deposit.

If you’re unsure, you can always transfer £1 and then call your solicitor or conveyancer direct to make sure the money has reached their account.

And as with any scams, if something doesn’t feel right (such as the caller rushing you or you’ve never dealt with them before) then it probably isn’t. Put the phone down and call your broker, lender, solicitor or conveyancer first to check the request is real. Those few extra minutes could save you thousands.

Baiting scams

These scams trick borrowers by offering very attractive loan terms. It could be incredibly low interest rates or cheap monthly payments. Their trick is to lure you into thinking you’re getting an amazing deal.

Any suspiciously low rates or monthly payments must always raise suspicions.

Once you decide to go ahead, they’ll leave time before calling back with different loan terms to the initial offer just before you finalise your deal.

Should the terms and conditions suddenly change, then ask them to send the new details. If they cannot do that, then avoid them.

How we can help

Our advice is to never make payments or pass on details without speaking to your broker or lender. It’s also a good reason to use a mortgage broker. They’re usually easier to contact than a lender as you won’t need to wait for a call centre. And in most cases, you’ll have met or spoken to your broker, so you’ll know what they look and sound like. Here are other reasons why we advise you to use a mortgage broker.

If you want to speak to us about your mortgage, contact our team today.