Security is simply a way to cut out risk of mortgage fraud

MOST of us will have heard stories of people exaggerating their income to get a big enough mortgage for the property of their dreams.

Hopefully the majority of the population now realise the dangers of this, given what has happened to the subprime market in the United States.

Part of the reason homeowners on the other side of the Atlantic were left in a situation where they couldn't afford their mortgage repayments is the fact they "self-certified" their income – with many inflating the amount.

But this week in the UK the Financial Services Authority (FSA) highlighted the dangers of mortgage fraud on an even larger scale.

Speaking at the Council of Mortgage Lenders (CML) fraud seminar, Philip Robinson, financial crime and intelligence division director of the FSA, said: "The greater threat is of organised rings, using mortgage and property fraud to make significant profits. They can include brokers, solicitors, valuers and other professionals in the property market. And the police tell us that these frauds are also carried out by criminals who are involved in other criminal activities – such as drugs or people smuggling."

That's why the imminent establishment of the National Fraud Strategic Authority should be welcomed.

But, as the FSA was keen to point out, the general public also has a role to play in fighting mortgage fraud – and indeed all kinds of fraud.

I know it can be frustrating, but we should try to understand why we have to answer so many security questions if we're on the phone to our bank's call centre, or produce our passport to apply for a mortgage.

This is especially true given the fact the FSA looks like it will come down hard on consumers who commit any kind of mortgage fraud.

Robinson said: "Consumer protection also means protecting them from themselves – by showing them that if they perpetrate fraud they should fear the consequences."

He makes it clear that people committing fraud could be at risk because they obtain mortgages with high loan multiples and loan-to-value ratios.

Be warned!

THIS week Lloyds TSB proclaimed the "boom in Scottish house prices has come to an end", with the first quarterly fall in the all-Scotland average house price for seven years.

While Edinburgh experienced an increase, other cities had a decline in prices. After years of growth, Aberdeen saw its prices drop by 4.1 per cent.

This can be seen as either good or bad news, depending on whether you own a home or want to get on the ladder.

If you are one of the millions of people who were hoping your property would prove to be your pension fund, rather than simply somewhere to live, you may not be feeling too happy.

On the other hand, potential first-time buyers will probably be rubbing their hands with glee about the prospect of finally being able to afford a home.

But how significant is this drop in prices? It's the first indication of a downturn in Scotland. Until now, while prices were going down in other parts of the UK, north of the Border was keeping up well.

And you only have to take a look at the number or properties on sale going to a fixed price from "offers over" in Edinburgh to realise that, in my view, we could be heading for recession.

FINALLY, it seems that living longer might not necessarily be a good thing. Well, not when it comes to pensions.

Company final-salary pension schemes may soon have to use much more realistic assumptions about how long their members are likely to live.

We'll find out more on Monday when the Pensions Regulator publishes its consultation document outlining plans to make schemes increase their longevity estimates.