After a BBC programme made allegations that consumers had been encouraged to commit fraud by regulated financial advisers, the Financial Services Authority (FSA) undertook a review of the self-certification mortgage industry.

The review examined what controls major lenders have in place to prevent mortgage application fraud arising from income overstatement.

Self-certified mortgages are those where lenders do not require documentary evidence of borrowers' incomes. Some mortgage companies were openly advertising that salaries would not be checked, although since the programme was aired this has stopped.

The BBC’s Money Programme last year alleged some house buyers were being encouraged to lie about their income in order to get mortgages.

In the hidden-camera documentary the BBC researchers found they could easily obtain mortgages through financial advisers that were six or seven times their supposed salaries by being advised to lie on the mortgage applications.

This week the FSA report was published and gives the all-clear saying: “Self certification lending accounts for a small proportion of overall mortgage balances (about 6%).”

“The number of customers who encounter difficulties with repayments is currently not significantly higher than those with standard mortgages. This suggests that borrowers have not been taking on larger mortgages than their income would justify.”

Commenting on the review, the FSA's spokesman on financial crime issues, Philip Robinson, said: “Self certification mortgages can be appropriate in certain circumstances, although our review has shown they are a small proportion of overall lending. Lenders' controls appear to be adequate in this area.”

"We would remind consumers that it is a criminal act to lie on their application forms. They know how much they earn, and should state that clearly.”

The FSA's review also looked at 'fast track' lending - where the lender chooses not to seek full income verification but retains the right to do so - and concludes that arrears data suggests "that such lending was currently performing better than mainstream status lending."

The CML welcomed the findings of the FSA review saying: "It is reassuring that the regulator's review does not find any evidence of widespread abuse of lending practices.”

“However, we would endorse the FSA's view that each firm should continue to evaluate the effectiveness of their controls in relation to self-cert and fast track lending.”

"We also echo the FSA's warning to customers that they have a responsibility to report their income honestly when making a mortgage application - making a false statement would be fraudulent. Finally, we agree with the advice that customers should alert the authorities - the Mortgage Code Compliance Board or the FSA - if they are encouraged by their adviser to lie when applying for a mortgage."