We all know that identity fraud is on the rise.  But one of the most disturbing developments revealed by the UK’s fraud prevention service, CIFAS, is the swing away from ‘previous address’ fraud to ‘current address’ fraud.

Current address fraud occurs where the victim lives at the ‘current address’ given on the fraudulent application. The fraudster is often a neighbour living in the same block of flats as the victim and applies for financial products by assuming the identity of the victim.

This can easily be done where there is a shared hallway and fraudsters can  intercept their victim’s post.

But an even more frightening  development is the rise in mortgage fraud, with analysts estimating that as many as 60,000 UK property have been acquired with fraudulent loans through  identity theft, with possibly as much as £17bn sitting on lenders’ books.

Chanel 4 news last week reported that in the year to date, the Land Registry paid out almost £4m in compensation to lenders and defrauded homeowners, compared to just over £2m om 2006-07.

Paul Doxey, managing director at Navigant Consulting told Channel 4 news: “In the ’80s and ’90s we saw a lot of property fraud, but what’s different in the recent frauds is the explosion of ID fraud.

It’s now a lot easier for criminals to obtain false IDs through the black market, which they can use as a cover for these frauds.”

Fraud lawyer Gary Miller of Mischon de Reya Solicitors, who helps lenders track down fraudsters, told Channel 4 news: “My experience tells me that what we see is the tip of the iceberg.”

People with buy to let properties or flats with shared mailboxes are the most vulnerable to ID theft, but no one can be complacent. Shredding bank and credit card statements and having post re-directed when you move is essential.

Check your credit record regularly with a credit reference agency such as Experian for any fraudulent activity conducted in your name.

David Hollingworth of London & County Mortgages says: “In the case shown on Channel 4, it was a buy to-let-property which was transferred into the name of a fraudster. It may have been a case of the landlord failing to have his post redirected to his home address.”
 
For more on identity fraud visit:
www.stop-idfraud.co.uk
http://www.cifas.org.uk/
http://www.experian.co.uk/

Read our guide to Identity Theft Insurance:
http://www.defaqto.com/consumer/credit-cards/guide-identity-theft-insurance.aspx

Read our guide to Card Protection:
http://www.defaqto.com/consumer/credit-cards/card-protection.aspx

Anyone approaching retirement, whose pension pot has been invested in equities, is likely to face a disappointing income and may well turn to equity release to make up the shortfall.

Equity release is a way of unlocking money from your home in retirement. By taking out a lifetime mortgage against the equity in the property, you don’t have to pay back any interest during your lifetime. Instead the interest rolls up and is repaid  from the proceeds of the sale of your home when you die.

There are also reversion schemes which allow you to sell a set percentage of your home to a property company which allows you stay in the property  home for the rest of your life rent-free.  When you die, the property company takes its percentage share and the remainder passes to your estate.

Today, equity release plans are much safer and more flexible than they used to be, with their “no negative equity guarantees” and the flexibility to drawdown small sums of money, as and when required, so that interest is only paid on the amount withdrawn.

But despite these improvements and more equity release providers in the market, these schemes have not taken off as expected.  Latest figures show a 16 per cent drop in sales in the year to date, compared with the same period in 2007.

Which? the consumer body attributes the fall-off to these schemes being poor value for money and inflexible. Which? says that those wanting to move into sheltered accommodation or a nursing are required by some providers to pay off the mortgage early, leaving them with  little money to fund care fees.

The receipt of extra money from an  equity release scheme can also affect an elderly person’s entitlement to state benefits, such as income support and council tax rebate. 

 There have also been complaints from family members who claim they only became aware of the existence of a lifetime mortgage on their parents’ home after their death.

Which? recommends that financial advisers should always encourage older people to consider trading down first rather than doing equity release, which should only be used as a last resort.

The equity release providers’ trade body, SHIP, (which stands for Safe Home Income Plans) insists that today’s equity release plans are far better regulated and flexible than they used to be.

Some equity release plans are ‘portable,’ in that they allow an elderly person to move into sheltered accommodation without triggering repayment.  Other schemes do not charge early redemption penalties if the borrower dies or moves into long term care.

But equity release clearly comes at a cost and compound interest on a lifetime mortgage grows at a a frightening rate. At 7 per cent interest, mortgage debt  doubles roughly every 10 years, leaving little or no equity for children to inherit.

Equity release requires expert financial advice. To find an IFA visit www.unbiased.co.uk

For more on equity release, read the Defaqto guide:
http://www.defaqto.com/consumer/mortgages/equity-release.aspx

To compare conventional mortgage rates visit:
http://www.defaqto.com/consumer/mortgages.aspx