Alarming acceptance of liar loans

More than half of Kiwis under 25 think it is acceptable to inflate their income on mortgage and consumer credit loan applications.

Wednesday, March 19th 2025, 8:17AM

by Sally Lindsay

This startling statistic came from new consumer fraud research by global analytics software company FICO. It has dubbed these ‘liar loans’.

The survey of 1,000 New Zealanders and 1,004 Australians was done by an independent research company in August last year.

When it comes to mortgages, nearly a quarter (24%) of Kiwis believe inflating income on applications is either acceptable or routine, climbing to 48% among Gen Z.

The survey also showed one in four people (26%) believe exaggerating income on general loan applications is justifiable (16%) or common practice (10%), rising to 53% among Gen Z.

FICO says the survey reveals a concerning shift in New Zealanders’ attitudes toward first-party financial fraud, particularly younger generations, with rising acceptance of income exaggeration on mortgage applications and other loans as well as false claims on insurance – behaviours that carry serious financial and legal risks.

Wellington-based Craig Pope Financial director Craig Pope (pictured) says the research is hard to understand. “Kiwi mortgage applicants can’t inflate their income and commit so called ‘fraud’.

“Mortgage advisers have to to see proof of income – pay slips, employment contracts, an employer’s letter stating the income after tax, or for the self-employed several years of financial accounts – before an application can be put before a bank.”

“It is a basic and important part of our job – sourcing and confirming in writing an applicant’s income. We can’t just accept what they say. Any income a borrower puts down in an application has to be substantiated. It’s black and white.”

He says a borrower exaggerating their income is not relevant to mortgages. “It might be for consumer debt or possibly non-bank lenders, who still allow an element of self-certification of income, but even then they are strict and there are checks and balances in place.”

While most New Zealanders (69%) oppose exaggerating income on financial applications, attitudes vary by age, FICO’s survey found. More than half (53%) of Gen Z (aged 18-24) respondents consider it normal or acceptable in some circumstances, compared to just 9% of those aged 65 and over.

A similar pattern emerges in mortgage applications, where 48% of Gen Z believe deliberate income misrepresentation is acceptable in some circumstances, compared to just 7% of seniors.

"As financial pressures mount in New Zealand, some consumers, especially younger ones, may feel tempted to bend the rules when applying for credit,” Diane Wylie, FICO New Zealand country manager says.

“But misrepresenting income or financial details—whether to secure a loan or access better terms—can have long-term consequences, from loan rejection to potential fraud charges. Financial literacy and responsible borrowing are more important than ever in today’s economic climate.”

Wylie says New Zealand’s $364 billion mortgage market faces rising risks as borrower attitudes toward income misrepresentation shift toward greater acceptance.

Even when a mortgage application from an existing customer appears legitimate on paper, borrowers may exploit their established banking relationships to commit fraud, she says.

Common tactics include inflating self-employment earnings, overstating bonuses, omitting debts, or misrepresenting personal circumstances making – it harder for lenders to detect discrepancies without thorough verification.

Pope says the one area where there can be confusion, but not fraud, is self-employed borrowers. For example, an applicant might put down their gross income rather than their net income. “If they do put the incorrect income, it is not usually on purpose. It is often a misunderstanding of how their business financials work.”

That is where advisers get to the source of income. “For anyone trying to fudge their income and employment terms it is fruitless because it comes out in the wash with the proof required.”

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