From tomorrow (1 September) mortgage providers will be able to check applicants' tax details with HMRC before agreeing to lend money, in a bid to reduce mortgage fraud.
Fraud can occur when someone claims to earn more money than they really do in order to borrow a larger mortgage. It has been estimated that the cost of mortgage fraud was £1 billion last year.
HMRC say that this new scheme, which was first announced in the March 2010 Budget, will be "an unprecedented opportunity for HMRC and lenders to work together to combat fraud in the mortgage industry".
A pilot scheme has already proved the scheme's worth since many potentially fraudulent applications were picked up on.
It works by mortgage lenders sending applicants' details to HMRC where they are checked against income tax and employment returns information.
However, as well as stopping fraud, the scheme also gives confidence to lenders to approve mortgages to genuine applicants.
A spokesman for the Council of Mortgage Lenders (CML), which helped set up the scheme, said: "There are people whose mortgages have been approved because of the checks; they can make lenders more confident."
The scheme is voluntary and is intended to only be used by mortgage lenders when they suspect that an applicant may be committing mortgage fraud.
The scheme will cost lenders £14 plus VAT to check applicants' details with HMRC and it is not thought that the Mortgage Verification Scheme will lengthen the process of having a mortgage application approved.
Director General of CML Paul Smee said: "Lenders have found during the pilot that the scheme has been very useful in helping them to lend responsibly. It has helped them to avoid lending in some cases where there is a risk of fraud, at the same time as giving them confidence about the borrower's credentials in some cases that they might otherwise have felt compelled to refuse."
Read more on the story (The Telegraph)
Find out how to obtain a mortgage (FindLaw)
Find local property solicitors throughout the UK (FindLaw)