The good news of all the lies told about mortgages: Chanticleer

Among borrowers who used a mortgage broker and admitted to making a misrepresentation in their application, 54% said their broker suggested they misrepresent the truth in some way. Among borrowers who went directly through a bank, 62% said their banker suggested they cheat.

And a staggering 81% of the 93 respondents who misrepresented their loans with ANZ Bank said they had been advised to do so by their consultant.

ANZ has struggled with well-documented loan processing delays over the past year, and the results of the survey may reflect this. An ANZ spokesperson said it remained confident in its verification processes, which have been bolstered more recently by the introduction of comprehensive credit reports.

“After several years of similar external reporting on the quality of applications, our delinquency numbers have gone down, not up,” the spokesperson said.

“Our numbers are as good as, if not better than, those of our peers, providing a strong indicator of ANZ’s ability to accurately verify loan applications.”

It is important to note that ANZ and the rest of Australian banks do not simply accept the lies told on mortgage applications. Australia’s extraordinarily low mortgage default rates show that banks have historically done a great job of anticipating loan misrepresentations and building up sufficient reserves.

But the combination of rising interest rates and the extraordinary prices mortgagers have paid to enter the housing market over the past 12 months will mean that the cohort of borrowers covered by the UBS survey will face a new test.

Luckily, Storey thinks he can get through it in relatively good shape.

The UBS survey shows that more than 51% of borrowers are more than three months ahead of their mortgage payments, while 42% believe they could cover between three and six months of mortgage payments in an emergency.

Additionally, 39% of borrowers say their expenses are much lower than their income, while about 60% say they can easily or fairly easily manage their finances.

“Our general conclusion is that prime borrowers, who are arguably higher risk, have the ability to weather rising interest rates, although there are pockets where stress could emerge with hikes. from the RBA exposing some vulnerability,” Storey said.

This is an important point. While UBS has been closely monitoring the phenomenon of “liar loans” for some years, Storey points out that the bank is not suggesting that Australia’s property sector hides a level of risk that threatens the wider economy.

But the first interest rate hike since 2010 and a likely drop in house prices – UBS projects a 5% drop by the end of calendar year 2023 – will put pressure on some of the borrowers who bought Last year. .

It remains to be seen what pressure and how these borrowers manage it.

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