Mortgage lenders may get access to tax return data

Posted in 'Mortgages' by Barry Stamp

26 August 2010

A new scheme that will allow lenders to more accurately verify an individual’s income could be introduced before the end of the year.

In a bid to reduce levels of fraud and improve the efficiency of the mortgage lending process, the Council of Mortgage Lenders (CML) is working with HM Revenue & Customs (HMRC), to share data on declared income.

Mortgage lenders will be able to access a single database and compare the information provided by the applicant with that held by HMRC.

In return, HMRC will be able to identify potential tax evaders, by looking for disparities between the information declared to it on tax returns, and that provided on a mortgage application.

The CML says that at this stage, the motive driving the data sharing arrangement is all about fraud detection, rather than income verification.

Losses from mortgage fraud quadrupled in the first 6 months of 2010, with reported cases totalling £96 million.

At the moment, most mortgage lenders verify income by using the National Hunter database. This allows a lender to check declared income against that declared on previous credit card and mortgage applications made to other lenders in the past. The new HMRC data sharing scheme is likely to become an additional and powerful tool both for mortgage lenders and for the taxman.

For consumers, in addition to the risk of having a mortgage application turned down if income is found to be exaggerated, if classed as ‘material falsehoods’ this will lead to fraud warnings being placed on credit files.

Mortgage applications are amongst the most stressful of all financial transactions, and just ensuring that your income is correctly provided may not always be enough to ensure a quick result. Checking your credit file for errors, making sure you’re not financially associated to any unwanted third party and verifying your presence on the electoral roll will all improve your chances of being accepted.

You can check the information that mortgage providers – and lenders in general – will use to assess any application you make by checking your Multi Agency Credit Report online with checkmyfile.

It’s the only place you can view your report based on data from all three UK credit reference agencies together in the same easy-to-understand format.

It's free to trial for 30 days and until you cancel, which you can do at any time, it costs just £8.99 per month for more than twice the information available from any other agency, and also includes your credit score and credit rating each time.

Should you come across anything you’re unsure about, expert advice from qualified credit analysts is just a free phone call or email away.

Check your credit report