Britain’s housing market is a “house of cards” that is set to implode after years of reckless mortgage lending, chronic oversupply of new flats and widespread fraud, a leading analyst said yesterday.

“We believe it is payback time for years of speculation and sharp practice,” Alastair Stewart, of Dresdner Kleinwort Wasserstein, said in a note to clients issued at the start of British housebuilders’ results season.

The warning came amid rising fears of endemic fraud in the housing market. The Financial Services Authority (FSA) said yesterday that it had banned a further two mortgage brokers for submitting false applications to lenders, in what appears to be a growing trend.

The action – against two partners in a mortgage broking firm in Ilford, Essex – came after a speech last week by Philip Robinson, director of the FSA’s financial crime unit, in which he urged the housing industry to tackle the problem. He said dozens of lenders had contacted the FSA with 200 allegations of mortgage fraud and more were coming in every week.

The bans were against Amjad Malik and Tahir Mahmood, of Abbaci Associates. They were charged with submitting, on behalf of clients, applications that contained false information relating to the clients’ incomes and jobs.

Apart from such individual cases of mortgage fraud, Mr Robinson said there was a far greater threat of organised rings attempting property fraud.

Mr Stewart, in his research note, advised shareholders in housebuilding companies to “take advantage of the recent bounce [in share prices] and head for the exit”. He said that housebuilders’ results would show the market was “hitting a wall” as forward orders for new homes collapsed.

Mr Stewart said there was a bubble in the market for new urban flats, which looked “in line for a full-scale crash”. He said: “Overbuilding, overlending and more than a whiff of fraud have in our view led to ‘mini-Floridas’ in cities from Leeds to Leicester.”

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