The survey of 1,228 Australians who recently took out a home loan in the past two years also revealed that some borrowers overstate their household income and under-represent their living costs and other debts.
“While some banks have tightened underwriting following APRA’s ‘sound lending’ guidance, it does not appear to have prevented applicants ‘stretching the truth’,” wrote UBS banking analyst Jonathan Mott in a note to clients. He further said that this highlighted the need for more rigorous auditing of loan applications.
Interestingly, borrower misrepresentation is more common when using a mortgage broker rather than directly securing the loan from a bank.
“Unsuitable loans create negative outcomes for lenders, brokers, and customers, so it’s actually counter-intuitive for a broker to encourage inaccuracy throughout the process,” said Chris McRostie, interim chief executive of the Mortgage and Finance Association of Australia.
