Two of Australia's biggest banks on Monday said they are investigating suspected fraud involving false declarations by a number of home loan borrowers who rely on foreign income.

ANZ Banking Group and Westpac Banking Corp said the alleged fraud was discovered during internal investigations and posed no credit risk.

Very few people understand the economic rationality behind leaving homes vacant. It often makes money for the owner. Credit:iStock

The announcement follows moves by ANZ, Westpac and Commonwealth Bank last month to clamp down on mortgage lending to non-residents, following regulatory concerns about lax lending standards and soaring house prices driven partly by foreign investment.