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Aussie banks sitting on A$500b of 'liar loans', UBS says

[SYDNEY] Here's something else for policy makers to worry about as they attempt to engineer a soft landing in Australia's property market.

The country's lenders could be sitting on A$500 billion (S$539.04 billion) of "liar loans", or mortgages obtained on inaccurate financial information, according to an estimate from UBS Group AG.

A survey by the firm of 907 Australians who took out a mortgage in the last 12 months found only 67 per cent stated their application was "completely factual and accurate", down from 72 per cent the previous year.

The most common inaccuracies were overstating income and understating living expenses, the survey found.

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These findings "suggest mortgagors are more stretched than the banks believe, implying losses in a downturn could be larger than the banks anticipate," analysts including Jonathan Mott wrote in a note to clients dated Sept 11.

And "liar loans," the analysts say, was a term coined in the US during the financial crisis. An ominous moniker for Australian lenders.