The Financial Services Authority (FSA) has launched a crackdown on mortgage fraud, which some have suggested is closing the stable door after the horse has bolted. That may be but it is still needed.

The first results demonstrate the conditions in which the credit crunch was allowed to happen. One mortgage broker said that its priority was giving customers what they wanted, with affordability and suitability of a mortgages simply a secondary consideration. This landed them with a meagre £35,000 fine.

While this was just a case of poor advice, other mortgage brokers have already been fined or banned from the industry for being implicated in making actual or potentially fraudulent mortgage applications.

There has been growing concern in recent months about the extent of mortgage fraud. The Association of Chief Police Officers (Acpo) puts losses from reported cases at £700m a year, and growing. However, lenders dispute that estimate, claiming it includes some double-counting.

The FSA took over mortgage regulation in October 2004. Two mortgage brokers were banned for fraud in 2006, six were kicked out last year and 17 have already suffered the same fate in 2008.

The most common form of mortgage fraud is inflating the income of the applicant. Sometimes this is with the customer’s consent, sometimes not. This may be done by exaggerating overtime estimates, by inventing an evening job, or even by including forged payslips in the application.

The advantage to the customer is a bigger mortgage for a bigger property. The broker wins a larger commission. Brokers who have been caught are generally one-man-band, High Street operators. Some have forged their own incomes - making investigations quicker and easier.

Inflating your income for the purposes of mortgage fraud may result in a larger mortage and, therefore,  a larger property, but it also greatly increases the risk that you will default on the loan and lose your home. This crackdown on mortage fraud may be too late to halt the worst effects of the credit crunch for banks but it could still save the homes of many consumers.

Data released this week suggests that the number of properties up for rent has jumped recently as people who cannot sell their homes decide to let them instead. The Royal Institution of Chartered Surveyors (Rics) says the slump in house sales is forcing many more people to become either landlords or tenants.  

In July, Rics members saw new instructions from landlords rise at their fastest rate on record. But potential tenants are outweighing would-be landlords, and helping to push up rents in many areas of the UK.  

The international credit crunch and the subsequent drying up of finance for new mortgages has produced the sharpest housing market slump seen since World War II. The number of house sales has already fallen by 50% in the past year and with mortgage approvals already down by 70% it looks likely that sales will fall even further in the coming months.

According to the Rics survey of residential lettings, 43% more of its members reported a rise in landlord instructions than saw a fall during the three months to July. That was up from a positive balance of 30% in the previous quarter.  

Actual lettings also went up strongly, with 37% more surveyors reporting a rise than a fall in lettings to tenants. Meanwhile 43% more surveyors reported a rise than a fall in the local demand for rented houses, compared with a balance of 34% in the demand for flats. Many potential buyers, finding it hard to get a mortgage, are now renting rather than buying new homes, with family houses especially in demand.  

The knock-on effect has been that rents have continued to rise, even though house prices are falling.  

However, the Rics findings contradict those of some other recent rental surveys. These have suggested that in fact new properties coming onto the rental market have outnumbered the increase in potential tenants. The property firm Knight Frank has predicted that rents in central London may fall by up to 5% this year because of an oversupply of “forced landlords”.  

Demand from prospective tenants appears to be strongest in the North of England, while new instructions from landlords are strongest in the Midlands and Wales, although the picture is not straightforward.