Solicitors and other professionals have been implicated in £41m of mortgage fraud which plunged the mutual Chelsea Building Society deep into the red in the first half, it emerged today.

In its interim accounts Chelsea said that the mortgage fraud, perpetrated between 2006 and 2008, involved ‘the artificial inflation of property values by third-party professionals’ involved in buy-to-let mortgage transactions.

The £41m impairment charge pushed the mutual into a first-half loss of £26m.

Stuart Bernau, chairman and interim chief executive at Chelsea, said: ‘Some [buy-to-let mortgages], linking with valuers and in some cases solicitors, have produced inflated valuations for properties when they applied for mortgages. This is definitely criminal activity.’

‘No doubt further fraud provisions will emerge through other institutions’ accounts,’ he added.

Chelsea said that it is ‘actively looking to recoup as much of the fraudulent money as possible’ from third parties.