PHOTO: Based on a survey of around 900 borrowers, UBS estimates that 41 per cent had inaccurate mortgage applications. (ABC News: Elise Pianegonda)
Australian home prices have surged almost 20 per cent over the past year, and investment bank UBS has warned that a record level of “liar loans” as buyers “chase the market” could be one reason why.
Key points:
- A record 41 per cent of loan applications contain factual inaccuracies
- The most common fudges are under-representing living costs and financial commitments
- The banking regulator says it has seen “no obvious poor-quality lending”
The bank’s annual survey of around 900 people who took out a mortgage over the past year showed that 41 per cent submitted loan applications that were not completely factually accurate — so-called “liar loans”.
That is a record high in the seven years UBS has collected this data, up from 38 per cent last year and 27 per cent back when the survey started in 2015.
It is noticeable that there was a brief dip during the banking royal commission hearings in 2018, at a time when the banking and financial regulators were also cracking down on risky lending.
While the majority of those who fudged the figures said their applications were “mostly factual and accurate”, just under a third of those who lied to their bank said their application was only “partially factual and accurate”, holding at a record high.
The most common areas of inaccuracy were under-representing living costs (34 per cent), under-representing financial commitments (28 per cent) and over-representing income (22 per cent).
Worryingly, the size of the misrepresentations also went up in 2021.
Of those who overstated income, 36 per cent did so by more than a quarter.
Likewise, 39 per cent of those understating living costs did so by more than 15 per cent.
UBS said the rising risk of home lending fuelling the current property boom was best captured in a record rise in “very high” debt-to-income mortgages — where the borrower owes at least six times what they earn each year — to 21.5 per cent of loans.
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