Taking out a loan is a daunting decision that could change your financial future. Sophie Elsworth explains what you need to know before signing the dotted line.

A record number of desperate homebuyers are resorting to providing false information in order to be approved for mortgages, a new survey has found.

Since the banking royal commission handed down its findings, it’s been tougher than ever for prospective homeowners to get a loan, with banks asking more questions and requesting extra documents to ensure estimates about living expenses and income are accurate.

Despite the extra scrutiny, investment bank UBS found record numbers of borrowers are getting away with submitting false information when applying for home loans.

The survey of 903 Australians who have taken out a mortgage in the last year found a record 37 per cent admitted their applications were “not completely factual and accurate”, up from 32 per cent in 2018.

Record high numbers of clients overstated their income (20 per cent), understated existing debts (23 per cent), understated living costs (34 per cent) and misstated multiple categories (23 per cent).

The difference between the figure for their actual and fake income also grew, with customers admitting they had overstated this by 17 per cent, up from 12 per cent in 2018.

Those who were most likely to lie on their applications were people who had been rejected for loans twice or more, with 76 per cent saying they had provided false information.

People who had bought more than one property over the last year were also quite likely to fudge their figures, with 63 per cent admitting to doing so.

More than half of those who had their mortgage rejected, needed a guarantor or were interest-only investors also took the dishonest route.

However, the survey held a warning for those tempted to lie.

In the last 12 months, 22 per cent who provided inaccurate information reported missing a mortgage payment compared with 6 per cent who said they were honest.

Loans linked to mortgage brokers were also more likely to feature misleading information than those coming from banks.

UBS analyst Jonathan Mott said it was expected the extra documentation requirements would lead to an increase in the accuracy of mortgage applications, but after an initial bump, this hasn’t continued.

“While asking increasingly detailed questions appears prudent, it does not appear to be

effective as many factually inaccurate mortgages are still working their way through the

process,” his report on the survey results noted.

Mr Mott believes regulators and lenders may need to consider moving away from asking questions to analysing data as comprehensive credit reporting and open banking are rolled out. In the meantime they should adopt more rigorous debt-to-income limits.