Invest
Lenders’ ‘white-collar crime’ putting investors at risk
An economic analyst has accused Australian lenders of “white-collar” crimes which have placed both property investors and the Australian economy at risk.
Lenders’ ‘white-collar crime’ putting investors at risk
An economic analyst has accused Australian lenders of “white-collar” crimes which have placed both property investors and the Australian economy at risk.
Lindsay David, founder of LF Economics, said in The Big Rort: A Mortgage Market Built on Deceit and Fraud that the way Australian lenders measure borrowers’ ability to repay loans can be problematic for the borrowers themselves.
According to Mr David, many Australian lenders use a combined loan-to-value ratio (LVR), as opposed to an individual LVR.
The approach allows investors to effectively use the unrealised capital in a property they already own as collateral, or a substitute for a cash deposit, against the property for which they require a loan. At the same time, lenders have the ability to report the LVR as being lower than it is, he explained.
“The use of unrealised capital gain (equity) of one property to secure financing to purchase another property in Australia is extreme.”
He continued: “Under these conditions, lenders produce guaranteed, exceptional short-term profits through a four-part strategy: extreme loan growth, high leverage, minimal loss reserves and declining underwriting standards.”
Further, he warned that a “high proportion” of Australia’s historically high household debt will “never be repaid” and argued that the Australian Prudential Regulation Authority (APRA) and the Australian Securities & Investments Commission (ASIC) were culpable for their lack of regulatory enforcement.
Referring to a number of parliamentary submissions made by LF Economics inquiries into white-collar crime penalties and the banking, insurance and financial services inquiry, Mr David said there is “evidence to suggest the regulators have played a critical role in allowing mortgage control fraud to flourish “even in the face of consumer protection laws”.
Mr David explained that mortgage control fraud is the practice of lenders intentionally defrauding borrowers by lending “far in excess” of borrowers’ ability to service the loan.
He added that the practice had reached “epidemic levels, especially in direct lending to high-risk borrowers and repackaging these loans into seemingly high-quality residential mortgage-backed securities”.
Mr David went on to argue that courtesy of lenders issuing of loans against unrealised capital gains, the Australian housing market had “ballooned” and now resembled a “house of cards”.
Pointing to a lack of regulatory enforcement and a “complete disregard” to the National Consumer Protection Act, Mr David claimed that housing sector participants “have been able to create an expanding house of cards by issuing interest-only loans to owners for the purchase of either an investment property or a new home for their adult children with very little or even no cash deposit.”
RELATED ARTICLES
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Home guarantee scheme shake-up challenges Australia’s housing market players
From 1 October 2025, the expanded Home Guarantee Scheme (HGS) materially widens what first-home buyers can purchase and where. By sharply lifting price caps and relaxing eligibility settings, the ...Read more
Property
GSB’s first‑home buyer play: turning policy tailwinds into market share
Great Southern Bank’s latest results show that nearly one in three of its new mortgages now go to first‑home buyers—evidence of a fast‑moving market reshaped by government guarantees, easing rates and ...Read more
Property
Why investors are fleeing and renters are scrambling in Australia's housing maze
Australia’s rental market is tightening even as individual landlords sell down. New data points to a multi‑year investor retreat tied to higher holding costs and regulatory uncertainty, while prices ...Read more
Property
Australia's 5% deposit guarantee: Unlocking gains while balancing risks in the market share race
Can a bigger government guarantee fix housing access without fuelling prices? Australia is about to find out. The Albanese government’s expanded 5% deposit pathway aims to help 70,000 buyers, remove ...Read more
Property
Australia's bold move the 5% deposit scheme shaking up the housing market
Can a government guarantee replace lenders mortgage insurance without inflating prices or risk? Canberra’s accelerated 5% deposit scheme is a bold demand-side nudge in a supply‑constrained marketRead more
Property
When rates drop but stress sticks: exploring Australia's mortgage arrears dilemma
Headline numbers suggest arrears ease as rates come down. The reality in Australia is messier: broad measures dipped into mid‑2025, yet severe delinquencies and non‑bank portfolios remain under ...Read more
Property
Property advice goes rogue as risks and opportunities knock on every door
A warning from the Property Investors Council of Australia has put a spotlight on the surge of unlicensed financial advice around property strategies. This is no niche compliance issue—it’s a ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Home guarantee scheme shake-up challenges Australia’s housing market players
From 1 October 2025, the expanded Home Guarantee Scheme (HGS) materially widens what first-home buyers can purchase and where. By sharply lifting price caps and relaxing eligibility settings, the ...Read more
Property
GSB’s first‑home buyer play: turning policy tailwinds into market share
Great Southern Bank’s latest results show that nearly one in three of its new mortgages now go to first‑home buyers—evidence of a fast‑moving market reshaped by government guarantees, easing rates and ...Read more
Property
Why investors are fleeing and renters are scrambling in Australia's housing maze
Australia’s rental market is tightening even as individual landlords sell down. New data points to a multi‑year investor retreat tied to higher holding costs and regulatory uncertainty, while prices ...Read more
Property
Australia's 5% deposit guarantee: Unlocking gains while balancing risks in the market share race
Can a bigger government guarantee fix housing access without fuelling prices? Australia is about to find out. The Albanese government’s expanded 5% deposit pathway aims to help 70,000 buyers, remove ...Read more
Property
Australia's bold move the 5% deposit scheme shaking up the housing market
Can a government guarantee replace lenders mortgage insurance without inflating prices or risk? Canberra’s accelerated 5% deposit scheme is a bold demand-side nudge in a supply‑constrained marketRead more
Property
When rates drop but stress sticks: exploring Australia's mortgage arrears dilemma
Headline numbers suggest arrears ease as rates come down. The reality in Australia is messier: broad measures dipped into mid‑2025, yet severe delinquencies and non‑bank portfolios remain under ...Read more
Property
Property advice goes rogue as risks and opportunities knock on every door
A warning from the Property Investors Council of Australia has put a spotlight on the surge of unlicensed financial advice around property strategies. This is no niche compliance issue—it’s a ...Read more
