the adviser logo

Mortgage misrepresentation ‘more prevalent via brokers’

by Francesca Krakue10 minute read
Mortgage misrepresentation ‘more prevalent via brokers’

Almost a third of Aussie mortgagors have admitted to providing factually inaccurate applications, with the level of inaccuracy “highly skewed” to those who secured finance via a mortgage broker, a report has revealed.

The report by UBS Investment Bank surveyed 1,228 Australians who have taken out a residential mortgage over the last 24 months.

The study found that only 72 per cent of respondents’ mortgage application was “completely factual and accurate”.

Thirty-two per cent of respondents who secured a mortgage via a broker misrepresented some element of their application, compared to 22 per cent who secured a mortgage via bank distribution.


“There was a statistically higher level of misrepresentation for customers who secured their mortgage via a broker,” the report said.

Compared with 13 per cent for bank channel equivalent, 41 per cent of respondents who used a broker in 2016 and misrepresented elements of their application did so “based on their broker’s suggestion”.

This was an increase from the 24 per cent of respondents who had misrepresented an application on the broker’s suggestion in 2015.

Of the 344 respondents who misrepresented parts of their application, 14 per cent over-represented household income (18 per cent of those who used brokers and 5 per cent who used bank networks), 17 per cent under-represented other financial liabilities, 13 per cent overstated other assets and 26 per cent under-represented living costs.

“We believe these results are disturbing given the recent housing market re-acceleration, elevated household leverage (186 per cent debt to income) and mortgages accounting for 62 per cent of bank loans,” the report said.

“While banks have tightened underwriting following APRA’s ‘sound lending’ guidance, it does not appear to have prevented applicants ‘stretching the truth’.

“While low unemployment and rising house prices may help prevent losses near term, more rigorous auditing of applications appears essential, especially via brokers.”

The participants were surveyed anonymously and were asked 63 questions about their application experience, motivations and expectations.

[Related: Mortgage broker convicted for fraud]

mortgageapplication x