‘Liar loans’ on the rise: 1 in 3 Australian home buyers guilty of fibbing

Over a third of Australian home buyers admit to lying on their home loan applications, according to recent research, and that could spell trouble, landing borrowers in a situation where they’re unable to meet mortgage repayments. 

Investment bank UBS surveyed 903 Australians who had secured a home loan in the 2018-19 financial year, and found that 37% of respondents were untruthful in their applications - up from 32% in the previous year. These borrowers either overstated their income, or understated their expenses and debts, to boost their chances of getting their home loan approved.

The survey also showed about half of investors with two or more properties had fibbed, as did half of borrowers who’d had their application rejected. 

Mozo’s Property Expert, Steve Jovcevski said this increase in ‘liar loans’ could be partly due to lenders keeping a closer eye on home buyers' expenses when judging their serviceability or how much they can afford to borrow.

“In the past, lenders would use a general expense calculation, but now they’re looking at what people are actually spending their money on, whether that’s essentials like groceries, utility bills and debt repayments, or non-essentials like media subscriptions and eating out.” 

So… does lying on your home loan application actually matter? 

The short answer: yes. 

Fudging the numbers to take out a home loan means you’re making life harder for yourself, since you’re potentially biting off more than what you can chew. In fact, UBS’s research reveals that 22% of borrowers who said they had fibbed on their applications had missed a mortgage repayment, compared to just 6% of those who hadn’t lied. 

“If you’re going to buy property, then you should be able to comfortably afford it. There’s no point lying about it because if you can’t pay off your home loan in the long run, then that’s going to be a huge negative for your credit history, for your lender, and for everyone involved,” Jovcevski said. 

“Telling the truth ensures that you give yourself more options in the future, in case something does go wrong,” he added. 

For instance, you may find yourself genuinely unable to afford your repayments down the track because of unforeseen circumstances, like suddenly falling sick or losing your job. If you’ve done “the right thing” up until that point, then there’s less risk that your lender would refuse to help you out. 

Jovcevski warned that fibbing could also land you in trouble when you’re trying to refinance, especially with the introduction of comprehensive credit reporting where lenders are now sharing information between one another about their customers’ liabilities. 

“If you’re looking to refinance your home loan and your income hasn’t gone up, you may end up spinning more lies, or else, you may not be approved for a refinance, in which case you’d be stuck in your current home loan,” he said. 

“And if the lender finds out that you’ve lied, then they could potentially sell your property or you may be charged very high default interest for breaching your home loan contract terms.” 

Servicing a home loan without the web of lies

Lenders may have tightened their criteria when it comes to checking your expenses, but other forces in the air are making now a great time for first home buyers and investors to enter the housing market. Think three RBA cuts since June, and APRA’s removal of the minimum 7% interest rate floor that banks would use to assess serviceability.

RELATED ARTICLE: First home buyers in luck as APRA loosens mortgage restrictions 

“It’s probably already going to be a little bit easier to service a home loan now than it was six months ago,” Jovcevski said. 

“We encourage home buyers to just follow what the lender is asking for and to hop onto a competitive interest rate that they’ll be able to afford comfortably.” 

Ready to jump into the property market and find a great deal for you? Check out these first home loans below, or head over to our home loans comparison table to compare even more options.

Compare first home loans - last updated 15 August 2022

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    3.44% p.a. variable
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    4.74% p.a. variable
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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