Canadian homeowners are feeling the impact of the Bank of Canada’s eight successive interest rate hikes.
Using the RATESDOTCA mortgage payment calculator, a variable-rate mortgage holder with a mortgage of $500,000 at a rate of 5.5% would have seen a total increase of approximately $1,129 per month (based on the prime rate of 2.4%) in mortgage payments since rate hikes began in March of 2022.
High interest rates continue to make affording a home prohibitively expensive. The average home price in Canada is $612,204 and excluding Canada’s most expensive cities (Greater Vancouver and Greater Toronto Area) brings the national average down to $499,000.
RBC’s national aggregate affordability index also notes that home affordability is the worst it’s been in nearly three decades.
As inflation persists and home ownership becomes increasingly difficult for many, how do Canadians view those who tweak their income or employment details to qualify for a mortgage?
A recent Leger survey, conducted on behalf of BNN and RATESDOTCA, studied Canadians’ attitudes toward mortgage fraud. The results found that nearly half or 47% of people believe that mortgage fraud is common in Canada.
And while 70% maintain that it’s never acceptable to commit mortgage fraud, 17% and 18% of respondents believe it’s acceptable to inflate one’s income or employment details, respectively, on a mortgage application.
Almost half of Canadians believe mortgage fraud is common
While there are several types of mortgage fraud, Equifax Canada reports that falsified account statements and falsified documents are some of the most common ones. The credit bureau also notes that fraudulent mortgage applications have increased by 52% since 2013.
Of the respondents interviewed, 47% believe mortgage fraud is common across Canada, with 12% believing that it is very common and 35% believing that it is somewhat common. On the other hand, 22% believe mortgage fraud is uncommon, while 30% don’t know whether it is prevalent across Canada.
One type of mortgage fraud is “fraud for shelter.”
“Mortgage fraud is a type of financial crime that involves lying or misrepresenting information on a mortgage application in order to obtain a loan under false pretenses,” explains Saira Hayat Khan, a realtor with RE/MAX Prime Properties.
“One common form of mortgage fraud is misrepresenting income, which involves lying about how much money you earn in order to qualify for a larger loan or a better interest rate.”
This also includes lying about your employment status or credit history.
“Mortgage fraud is definitely becoming more common as purchasers are struggling to meet the criteria with [the current] high rates,” Khan says.
70% maintain it’s never acceptable to artificially inflate one’s income, while 17% think it is
Seventy per cent of the respondents maintain that it is never acceptable to commit mortgage fraud. A significant percentage (85%) of those who say it’s never acceptable to inflate one’s income to secure a mortgage are 55 and older. And 75% of these respondents already own a home. In comparison, only 48% of respondents 18-34 say it's never acceptable to inflate one’s income, and of these, 65% do not own a home.
Perhaps this data is indicative of times when it was more affordable and easier to own a home, and an older demographic may be further removed from the realities of purchasing a home in the current market.
In the current scenario, 17% of respondents believe that it is acceptable to artificially inflate one’s income on an application in order to secure a mortgage. Out of the 17%, 14% believe that it is acceptable sometimes, depending on the circumstance. While 3% say that it’s always acceptable.
18–34-year-olds (33%) and men across all age groups (20%) are more likely to believe that it is acceptable to inflate one’s income. While only 16% of women (across all age groups) deem it acceptable.
Interestingly, residents of British Columbia (B.C.) — home to some of the country’s most expensive and competitive mortgage markets — are more likely (30%) to find it acceptable to inflate their income to secure a mortgage as opposed to 14% across the rest of Canada.
74% maintain it’s never acceptable to misrepresent employment details, while 18% believe it is
Similar to inflating one’s income, 74% maintain it’s never acceptable to misrepresent employment details, like misrepresenting one’s position, employment status, or the period of employment.
Those that are 55 and older (89%), and respondents who own a home (78%) are more likely to believe that misrepresentation of employment details is never acceptable. This is in comparison to 51% of 18–34-year-olds and 69% of respondents who do not own a home.
On the other hand, 18% of respondents believe that it is acceptable to misrepresent employment details. Breaking this down further, 14% believe it is acceptable sometimes, depending on the circumstance, and 4% believe that it’s always acceptable. Those in the age group of 18-34 are more likely to justify the misrepresentation of employment details.
Like previous findings, residents of B.C. are more likely (32%) to find it acceptable to misrepresent employment details versus 14% across the rest of Canada.
Consequences of mortgage fraud
“The consequences of committing mortgage fraud can be severe,” explains Khan. “If you are caught, you may face criminal charges and potential jail time.”
“Additionally, you may be required to pay fines and restitution to the victim(s) of your fraud. You may also be banned from obtaining future loans, and your credit score may be negatively affected, making it more difficult to obtain credit or loans in the future,” she says.
Lastly, if your employer finds out that you’ve misrepresented employment details to secure a mortgage, you can be suspended or sued for this fraud.
Shop around for a mortgage to get the best rate possible and increase your chances of more affordable mortgage payments.
An online survey of 1,521 Canadians (older than 18 years) was completed between February 17 and 19, 2023, using Leger’s online panel. No margin of error can be associated with a non-probability sample (i.e., a web panel in this case). For comparative purposes, though, a probability sample of 1,521 respondents would have a margin of error of ±2.5%, 19 times out of 20.
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