The Financial Services Authority (FSA) has warned that buy-to-let fraud may be on the increase as a rising number of rental sector investors lie to banks in order to secure the best deals.

According to reports in the Financial Times, prospective landlords are lying to lenders over such details as their income and buyer status, with some pretending to be first-time buyers. In some cases, professional landlords are believed to have said that they intend to live in their rental properties. Such behaviour, which is tantamount to fraud, is intended to secure bigger and cheaper loans.

In light of these findings, the FSA warns that banks could be facing a significant risk, putting the quality of their lending books under jeopardy. The FT highlights figures showing that a record of 330,000 new mortgages were taken out in 2006, up by 57% on the year previous.
Hamptons Mortgages recently reported that many buy-to-let mortgage products are cheaper than their residential counterparts.