Attempted contractor mortgage fraud was on the increase last year according to the UK’s fraud prevention service, CIFAS.

Prior to 2009, mortgage fraud cases had been on the decline but last year identity fraud and misuse of facility fraud cases rose, although application fraud cases are still falling.

The CIFAS report says that total mortgage frauds rose by 10% last year, whilst identity fraud cases rose by a massive 32%. 25% less people are using false documentation or lying on application forms, the primary causes of application fraud.

A man in his 40s is still the typical victim of identity fraud but there has been an increase in the number of women who are being impersonated.

The CIFAS is blaming some of this increase on unscrupulous valuers who help fraudsters buy a property at a low price and then sell it on at a large profit. Corrupt solicitors are also fuelling the increase.

Personal debt has been a major problem in the UK since the recession began and the value of written off contractor mortgages last year was £984m. In total, UK lenders wrote off £9.3bn in loans to people in 2009.

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The lack of recovery in the housing market in the UK is having a knock-on effect on developers and members of the RCIS.

For the 7th consecutive quarter members of the Royal Institute of Chartered Surveyors have seen a decline in their workloads whilst housing developers are reluctant to build new homes that nobody will buy. The Glenigan Index, which measures the value of new private home construction, reports a drop of 20% last year.

According to Steve Turner from the Home Builders Federation, the market needs to make more contractor mortgage funds available to let people purchase residential property. He believes that until this happens, the housing market will remain sluggish.

And it looks like the situation is set to get even worse in 2011 when banks and building societies have to begin repayments on loans they received from the government in 2007 and 2008. This will lead to more stringent credit criteria according to Moodys, the credit-rating agency.

It was hard enough to get a contractor mortgage last year as lender’s approvals dropped by 2.3m to a mere 1.3m. Although lobbyists have been calling on the Bank of England to further delay the repayment timetable, the Bank of England Governor, Mervyn King has confirmed that it will go ahead as scheduled. Banks and Building Societies will then have until April 2014 to repay a total of £319bn borrowed from the government’s emergency state schemes.

Prior to the credit crisis, UK lenders could raise money through the wholesale markets and in the year before the crunch they raised £130bn through those channels. But in the past 2 years they have only been able to raise £11.5bn according to figures from the Council of Mortgage Lenders.

Many Building Societies will be hit hard by this as they have already had their credit ratings cut. In fact, only the Nationwide now has the ability to look to the wholesale markets. Additionally building societies lost deposits of £7.6bn in 2009.

None of this spells good news for anyone hoping to sell their property, or get a foot on the mortgage ladder, over the next few years as economists and credit experts believe house prices will slump and contractor mortgages will be made available.

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The Government plans to withdraw £300bn in financial support over the coming 4 years and this has led to the leading trade body for contractor mortgage lenders claiming that the entire housing market in the UK could completely grind to a halt.

It seems to be something of a catch 22 situation. Banks are encouraged to lend based on deposits but they’re not going to save enough to cover demand and yet if the Government keeps stepping in to help, the national debt will get even larger.

The Government’s Special Liquidity Scheme has already provided the banks with almost £200bn since the economic crisis kicked in. This scheme allowed them to exchange mortgage bonds for cash. Another £100bn came from the Credit Guarantee Scheme which allowed lenders to raise debt from the markets.

However, this funding has to be repaid in 2 instalments; the first due in 2012 and the second in 2014. The CML has now written to the Government warning them that the lack of access to funds could force them to stop lending.

Of course the government’s ultimate aim is for banks to lend money that they actually possess, which of course makers sense because the reason we got into this mess in the first place was because banks borrowed huge sums on the wholesale market. But we simply aren’t saving enough. The Bank of England reckons the figure is around £6bn as opposed to the £300bn needed to make the banks self-reliant. So it looks like, one way or another, this problem is going to remain with us for some time.

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According to the latest figures published by the Halifax, house prices in England and Wales rose by 0.6% in January 2010. Although this is a relatively small gain, it represents the seventh straight monthly increase in UK property prices since April last year.

On average, prices have now risen by 9.9% over the last seven months, although January’s gain was slightly lower than the previous month on month increases due to the seasonal slow down in house sales post Christmas.

The Halifax, part of the Lloyds Banking Group, is cautious about the prospects of more price gains, particularly since many analysts believe the market, and the availability of contractor mortgages, is set for another drop.

Nationwide Building Society, the nation’s third biggest provider of contractor mortgages, has recorded a 1.2% rise in the value of house prices in January although their chief economist, Martin Gahbauer, is equally hesitant over the possibility for further price gains.

Meanwhile, according to reports from Santander, they are now responsible for more than 50% of all new mortgages in the UK. The group has recently replaced household names Alliance & Leicester, Bradford & Bingley, and Abbey on the high street as well as embarking on an aggressive brand awareness campaign in Britain. The bank has also expanded it’s saving book by adding another $14.9 billion to an already healthy balance sheet.

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It will come as no surprise to read that total mortgage lending in 2009 dropped in 2009. Total lending was £143.7 billion, down by 43 per cent in comparison with the previous ear. However these figures are better than some analysts had predicted.

The good news is that the contractor mortgage market does appear to be recovering. The Council for Mortgage Lenders report that the last month of the year saw the first year-on-year rise in lending since the start of the credit crunch. At £13.7bn, lending was 14% up on November and 3% ahead of December 2008.

CML economist Paul Samter says that while this may have been due to the impending close of the stamp duty holiday for properties under £175,000, there is “every reason to expect a gradual improvement in the latter part of the year”.

This seems to be borne out by comments from Paula John, editor of Your Mortgage, who says that so far, 2010 has been more upbeat for the housing market than many people would have previously anticipated.

“There has been more activity in the housing market, first-time buyer numbers are not dramatically up or down on their historical average, but they have picked up a bit which is always good news,” she commented.

However, she states that people are still “sitting tight” and not wanting to move house because of the 40 per cent minimum deposit that is required for the best home loan deals.

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