"Mortgage fraud is "systemic" in Australia, with more than a quarter of recent home buyers admitting they misrepresented some information on their loan application."
"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."
"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."
"Given the rapid house price inflation that has been seen in parts of Australia (especially Sydney and Melbourne), the fact mortgages now represent 62 per cent of the major banks' loan books and household debt to disposable income is now at 186 per cent, we believe that mortgage risk is more elevated than it has been previously," UBS's analysts noted.
"Another concern raised by UBS was that applicants who tended to fudge their loan applications also displayed risky credit card behaviours.
In addition, they were people who were more likely to be spending all of their income, at 36 per cent versus 25 per cent of those who were truthful.
That means this group is less likely to have a savings buffer in the event of adverse life events, such as poor health or job loss."
"Another reason why people may be prepared to take the financial risk of lying in their application to borrow more money than they can potentially afford is that only 4 per cent of them expect house prices to fall over the next year."
"When it comes to which state was the least honest, it is perhaps unsurprising, but concerning, that the state with the nation's highest home prices — New South Wales — had a much higher rate of fudging loan applications than anywhere else, with Victoria second."
"The investment bank also warned banks that mortgage fraud could invalidate some of the lenders' mortgage insurance (LMI) policies they believe are protecting parts of their loan book."
