Nine people arrested over a suspected £40 million mortgage fraud have been released on bail. The eight men and one female are suspected of targeting Bradford and Bingley in a massive buy-to-let scam involving more than 500 properties.

The investigation is centred on Eastbourne Financial Services limited (EFS), an East Sussex- based mortgage broker in liquidation.

Among those arrested are believed to be a solicitor, property developer, two mortgage brokers and a bank employee.

Large scale mortgage frauds involve criminal gangs who artificially inflate the values of property. After obtaining mortgages against the false value of buildings, the gang defaults on payments and run off with the money. The bank is then left out of pocket when the property is repossessed and resold at a decreased price.

The once rising property market of the past decade has made it easier for banks to gloss over fake loans. However, the current climate has left some lenders with significant holes in their balance sheets.

The nine suspects, aged between 29 and 73, were questioned at separate police stations on suspicion of conspiracy to defraud and money laundering.

The Association of Chief Police Officers (Acpo) issued new guidance to all forces warning of the huge scale of mortgage fraud.