House price 'rip-offs' probed by watchdog (Irish Independent)

04 November 2011

Mortgage brokers are being investigated over allegations that some of them colluded with estate agents to inflate property prices and rip off homebuyers.

In an unprecedented move, the Financial Regulator is checking claims that brokers have illegally shared data about how much people could afford to pay.

The sweeping probe comes after persistent claims that brokers may have used housebuyers' financial information to artificially inflate house prices by pushing buyers to the absolute limit of their spending power.

That has now come back to haunt the thousands who are suffering negative equity -- where people end up owing more money on their property than it is worth.

The fear is that some people were forced to pay too much for their houses as estate agents and brokers illegally traded information on what people could afford.

Most brokers have legitimate referral agreements with estate agents, and there is no suggestion of any illegal collusion.

These include Irish Mortgage Corporation and Hooke & MacDonald, which have close links; Sherry FitzGerald has its own mortgage operation called Sherry FitzGerald Mortgages; estate agents Lisney has its own mortgage operation; while GMC Mortgages is linked to Douglas Newman Good. Savills Hamilton Osborne King works with Simply Mortgages.

However, what is worrying the regulator is the large numbers of smaller estate agents in rural towns which tend to also operate as mortgage brokers.

It is understood the Financial Regulator is most concerned about those who often have business cards giving their details as an estate agent on one side and describing themselves as a mortgage broker on the other side.

It is an offence under data protection legislation for estate agents and mortgage brokers to share personal financial information without a consumer's express permission.

Michael Dowling, of the Independent Mortgage Advisers Federation, denied the dodgy practice was widespread. But he admitted yesterday that some unscrupulous brokers acting in concert with estate agents did force house prices to be artificially inflated.

Mr Dowling said: "When a mortgage broker knows how much money a buyer has been approved for, the auctioneer then knows how far he or she can push the buyer on the price.

"There is not huge evidence that it happened, but when it does it creates a situation where people were pushed to pay more because of privileged information."

Confirming it was probing brokers, a spokesman for the Financial Regulator said: "The results will be made public when our work is complete some time later this year."

Several large brokerages contacted yesterday admitted they have referral agreements with estate agents, but since a 'Prime Time' expose in December 2006 they changed their procedures.

Frank Conway, of Irish Mortgage Brokers, said most brokerages have links with estate agents, and his firm had links with Hooke & MacDonald. But procedures have been put in place to ensure their is no sharing of personal data without the permission of customers.

IFG Mortgages, which has some 150 brokerages in its network, said brokers who also owned an estate agency were being encouraged to have separate offices.