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The latest research from UBS analysts Jon Mott and Rachel Bentvelzen suggests serious doubts remain about the lending standards of Australian banks.

And Australian mortgage borrowers are either “very wealthy or stretching the truth”.

They base their conclusions on data provided by CBA, NAB and Westpac which shows average gross household income for both owner-occupiers and investors.

“We have benchmarked the banks’ mortgagor income disclosure against the Australian population using Census, Household Income & Wealth Survey and Tax Office data,” UBS said.

And the figures suggest a heavy skew in approved mortgages to higher-income earners — too heavy, according to UBS:

Based on the numbers above, almost more than two-thirds of mortgages last year were taken out by households earnings more than $200,000 per year.

“These numbers do not appear logical and are highly improbable,” the analysts said.

“We believe this provides further support for our concerns over factually inaccurate mortgage applications which are permeating Australia.”

Mott and Bentvelzen noted that the ABS doesn’t provide figures on refinancing loans for investment properties — which could reduce from share of loans to households earning over $500,000 from 42% to around 32%.

However, they argued that high-income earners are “less likely to be under financial stress and therefore are less likely to refinance as frequently in response to price discounting”.

The latest research follows on from Mott and Bentvelzen’s “Liar Loans” research last year, where they said around one third of prospective borrowers had factual inaccuracies on their mortgage application.

But property analyst Pete Wargent told Business Insider that the research doesn’t provide any “hard evidence” of material risks stemming from poor lending standards.

“If mortgage fraud is as widespread as often implied then it should be straightforward to provide more concrete evidence of it,” Wargent said.

“A borrower today provides payslips and a PAYG summary to check prior year income, and if banks are unsure they can phone HR department to check — though privacy rules could theoretically mean they don’t provide information,” Wargent added.

Wargent said there may be higher risks around self-employed borrowers “where accountants could help to pump up incomes in any given year or period, and in some instances the self-employed cohort can self-declare incomes – which is prone to exaggeration”, Wargent said.

“But lenders can at the very least simply check Business Activity Statements (BAS) returns and their PAYG tax paid.”

Research from Standard & Poor’s last month also showed that the number of Australian borrowers falling behind on their mortgages is in decline.

But for now, UBS remained concerned about material systemic risks stemming from poor lending standards by Australian banks.

The analysts said the data provided by the banks indicates that the biggest proportion of home loans — 24% to 33% — are taken out by applicants earning between $200,000-$500,000 per year:

But clearly, households in that bracket don’t represent the biggest proportion of Australia’s population.

Based on figures from the Australian Bureau of Statistics, UBS said the actual income distribution across Australia’s 8.3 million households looks more like this:

The two charts show that the number of mortgages issued to high-income households last year was significantly higher than their representative share of the population.

To reach their conclusion, UBS then extrapolated their findings against the total number of mortgages written in Australia in 2017 — around 950,000, according to data from the Australian Bankers Association.

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