Have you fibbed on a home loan application? You’re not alone

Buying a house can be an intimidating process. For most Australians, it is one of the most significant financial investments you’ll ever make in your life, and when you picture your family in a new home, it’s hard not to get emotionally invested in the purchase.

With so much on the line, it’s understandable that many may feel the need to tell white lies when facing an eligibility assessment for a home loan.

According to recent research by Experian, one-quarter of Australians seeking home loans bend the truth when lodging their applications. Most who admitted to lying believe that they would be judged unfairly or it would be too detrimental to their approval chances if they were completely honest.

The most common lies told by home loan applicants are:

• 29% did not disclose an upcoming job change.

• 28% understated their existing debts.

• 21% overstated their annual income.

• 19% withheld that they were expecting a child.

What’s the long-term impact of lying on a loan application?

This pattern is potentially concerning, as the value of loan approvals is higher than ever. The most recent Australian Bureau of Statistics (ABS) lending indicator numbers show substantial increases in loan commitments. In April 2021, there was an additional 3.7% increase on March’s record high of $30.2 billion.

Borrower-accepted home loan commitments

Data source: ABS

With the current property boom in Australia’s capital cities, Experian’s data indicates that some homebuyers engaging in the market could possibly be telling white lies in order to take on mortgages that, in reality, they are not in a position to pay.

“It’s so important for people to provide correct information on their application, whether it’s for a phone plan or a home loan,” said Experian’s general manager of decision analytics for ANZ, Mathew Demetriou. “If you don’t, the lender cannot fully understand your financial situation, and this could hinder you in the long run.”

Despite the prevalence of mistruths on loan applications, 1 in 5 Australian consumers believe it is the credit provider’s sole responsibility to give someone a line of credit that is within their means, with less than a third thinking it is up to the individual to know what they can afford. A further third think it is both parties’ responsibility, but with more onus on the credit provider.

Demetriou added that “withholding information presents challenges for lenders within responsible lending practices. Without an accurate picture of a customer’s finances, lenders cannot be sure they are providing credit that is appropriate for that individual.”

Although 40% of consumers put the responsibility of proper financial checks on the institution, Experian’s research also highlighted that 75% of consumers think a home loan application should be processed within only three days. A further 22% of that segment would expect to be approved for a home loan within 24 hours.

In order to meet the demands of customers, while still properly assessing potential loan applicants, Demetriou said that “credit providers need to be assessing their origination process and looking at how they can improve data accuracy at the point of acquisition.”

For more information on home loan rates, borrowing figures and more, check out our Australian home loan statistics hub.