Close to one in five Canadian millennials have inflated their income on a mortgage application, according to a recent survey from Equifax Canada.
The poll collected the responses of 1,545 Canadians from across the country. A poll of this size carries a margin of error of +/- 2.5%, 19 times out of 20.
Equifax found that mortgage fraud is a growing problem, especially among the millennial cohort (those born between the years of 1981 and 1996.)
Equifax defines mortgage fraud as “when someone – you, a mortgage broker or agent, a real estate agent or a lawyer – misrepresents, lies or exaggerates information to obtain a mortgage that would not have been granted if the truth had been told.”
Nineteen percent of millennials surveyed said they’d lied on an application, compared with 12% as the national average. But not only are millennials lying on their mortgage applications — almost 23% of them think it’s acceptable to do so. That’s nearly double the percentage of the general population (12%) that answered yes to the same question.
“It’s concerning that so many younger adults we surveyed believe it’s OK to inflate their income to purchase the home they want,” said Julie Kuzmic, Director of Consumer Advocacy at Equifax Canada, in a release. “Fudging income numbers when completing a mortgage application is fraud. It also becomes a slippery slope for these people who may end up stretching themselves too thin.”
Misrepresentation of income is especially concerning in today’s housing market, where wannabe homebuyers must pass a “stress test” in order to qualify for a mortgage, and prove they can handle mortgage payments at a higher interest rate than their lender is offering them, or the Bank of Canada’s five-year benchmark rate of 5.19% — whichever is higher.
According to the survey, 23% of millennials said they think mortgage fraud is a “victimless crime,” in which all parties consent to lying and no one gets hurt. But by inflating their incomes in order to secure a mortgage, millennials might actually be hurting themselves.
“Failing to make mortgage payments in full and on time can negatively impact your credit history and credit scores,” said Kuzmic. “What some may see as a little white lie during the mortgage application process could have legal consequences or become a very hard lesson for people to learn if they cannot keep up with their mortgage payments.”
While the survey didn’t ask millennials why they decided to fib on their mortgage applications, results reveal that high home prices and the restrictive nature of the mortgage stress test are a growing concern for Canadians.
Equifax learned that 69% of those surveyed who are planning to get a mortgage believe that foreign investments in real estate are the sole cause for higher home prices; 70% said the federal government should do more to help first-time homebuyers; and 48% said the stress test should be relaxed in some way for first-time buyers.