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
Australia’s mortgage knife‑fight: investors, first‑home buyers and the new rules of lender competition
The mortgage market is staying hot even as rate relief remains elusive, with investors and first‑home buyers chasing scarce stock and lenders fighting for share on price, speed and digital experienceRead more
Property
Breaking Australia’s three‑property ceiling: the finance‑first playbook for scalable portfolios
Most Australian investors don’t stall at three properties because they run out of ambition — they run out of borrowing capacity. The ceiling is a finance constraint disguised as an asset problem. The ...Read more
Property
Gen Z's secret weapon: Why their homebuying spree could flip Australia's housing market
A surprising share of younger Australians are preparing to buy despite affordability headwinds. One in three Gen Z Australians intend to purchase within a few years and 32 per cent say escaping rent ...Read more
Property
Tasmania’s pet-positive pivot: What landlords, BTR operators and insurers need to do now
Tasmania will soon require landlords to allow pets unless they can prove a valid reason to refuse. This is more than a tenancy tweak; it is a structural signal that the balance of power in rental ...Read more
Property
NSW underquoting crackdown: the compliance reset creating both cost and competitive edge
NSW is moving to sharply increase penalties for misleading price guides, including fines linked to agent commissions and maximum penalties up to $110,000. Behind the headlines sits a more ...Read more
Property
ANZ’s mortgage growth, profit slump: why volume without margin won’t pay the dividends
ANZ lifted home-lending volumes, yet profits fell under the weight of regulatory and restructuring costs—an object lesson in the futility of growth that doesn’t convert to margin and productivityRead more
Property
Rate pause, busy summer: where smart capital wins in Australia’s property market
With the Reserve Bank holding rates steady, the summer selling season arrives with rare predictability. Liquidity will lift, serviceability stops getting worse, and sentiment stabilises. The ...Read more
Property
The 2026 Suburb Thesis: A case study in turning trend lists into investable strategy
A new crop of ‘suburbs to watch’ is hitting headlines, but translating shortlist hype into bottom-line results requires more than a map and a mood. This case study shows how a disciplined, data-led ...Read more
Property
Australia’s mortgage knife‑fight: investors, first‑home buyers and the new rules of lender competition
The mortgage market is staying hot even as rate relief remains elusive, with investors and first‑home buyers chasing scarce stock and lenders fighting for share on price, speed and digital experienceRead more
Property
Breaking Australia’s three‑property ceiling: the finance‑first playbook for scalable portfolios
Most Australian investors don’t stall at three properties because they run out of ambition — they run out of borrowing capacity. The ceiling is a finance constraint disguised as an asset problem. The ...Read more
Property
Gen Z's secret weapon: Why their homebuying spree could flip Australia's housing market
A surprising share of younger Australians are preparing to buy despite affordability headwinds. One in three Gen Z Australians intend to purchase within a few years and 32 per cent say escaping rent ...Read more
Property
Tasmania’s pet-positive pivot: What landlords, BTR operators and insurers need to do now
Tasmania will soon require landlords to allow pets unless they can prove a valid reason to refuse. This is more than a tenancy tweak; it is a structural signal that the balance of power in rental ...Read more
Property
NSW underquoting crackdown: the compliance reset creating both cost and competitive edge
NSW is moving to sharply increase penalties for misleading price guides, including fines linked to agent commissions and maximum penalties up to $110,000. Behind the headlines sits a more ...Read more
Property
ANZ’s mortgage growth, profit slump: why volume without margin won’t pay the dividends
ANZ lifted home-lending volumes, yet profits fell under the weight of regulatory and restructuring costs—an object lesson in the futility of growth that doesn’t convert to margin and productivityRead more
Property
Rate pause, busy summer: where smart capital wins in Australia’s property market
With the Reserve Bank holding rates steady, the summer selling season arrives with rare predictability. Liquidity will lift, serviceability stops getting worse, and sentiment stabilises. The ...Read more
Property
The 2026 Suburb Thesis: A case study in turning trend lists into investable strategy
A new crop of ‘suburbs to watch’ is hitting headlines, but translating shortlist hype into bottom-line results requires more than a map and a mood. This case study shows how a disciplined, data-led ...Read more
