Finance Property One third of us have lied on mortgage applications: UBS report

One third of us have lied on mortgage applications: UBS report

One in 20 respondents said their application was only "partially factual". Photo: Getty
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Mortgage fraud is “systemic” in Australia, with more than a quarter of recent home buyers admitting they misrepresented some information on their loan application.

The disturbing results come from a survey of 1228 people who had taken out a mortgage over the past two years, conducted by investment bank UBS.

The key finding was that 28 per cent of people surveyed said their mortgage application was not totally factually accurate.

Of those who admitted misstating information, the bulk said their application was “mostly factual and accurate”.

However, one-in-20 mortgage applicants admitted that their loan application was only “partially factual and accurate”, while 2 per cent “would rather not say”.

Out of the people who misrepresented parts of their application, 14 per cent said they overstated household income, 13 per cent overstated asset values, 17 per cent understated their debts, more than a quarter understated living expenses, while over 40 per cent said “other” or would not say what they had lied about.

Around 12 per cent admitted to misstating information in multiple areas of their application.

“Unfortunately survey results suggest misrepresentation is systemic with findings similar across the 2015 and 2016 vintages, price-to-income levels, LVR [loan-to-value ratio], owner occupiers and investors,” the analysts wrote.

“However, there was a correlation between borrowers who misrepresented their application and: those whose expenditure was broadly equal to their income; stated they are under financial stress; or have missed a debt payment.”

UBS added that, if anything, the survey was likely to understate the proportion of people who had fudged some part of their application.

“It is difficult to reject these findings, in our view,” argued the UBS analysts.

“It is highly unlikely that the respondents would have stated they misrepresented their mortgage documentation when they were in fact truthful.”

“If anything, we believe it is more likely these figures may understate the level of misrepresentation in mortgage applications as some respondents may not want to state they were less than completely accurate despite anonymity.”

Misrepresentations more prevalent with brokers

While the overall proportion of people who misstated information on their loan application was high, an even greater proportion who applied through a mortgage broker misled their lenders.

Almost a third of people who got their mortgage via a broker admitted they were not “completely factual and accurate” with their details. That compared to 22 per cent who applied directly through the lender.

About 17 per cent of respondents understated their debts. Photo: Getty.
About 17 per cent of respondents understated their debts. Photo: Getty.

The rate of applicants who admitted to being only “partially factual and accurate” was twice as high among mortgage broker customers as with direct bank applications.

While only 13 per cent of loan applicants who went through a bank and had misstated their details said their banker suggested doing so, the result was vastly different for mortgage brokers.

“Of the 2016-vintage respondents who secured their mortgage via a broker and misrepresented their application, 41 per cent of them stated they had done this on the suggestion of their broker.”
UBS report

There was also evidence brokers were becoming more likely to advise clients to make misrepresentations.

“This was statistically significantly higher than the 24 per cent of respondents who had misrepresented an application on the broker’s suggestion in 2015,” UBS added.

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