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Are Millennials More Likely to Lie on a Mortgage Application?

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It appears so, according to a survey released by Equifax this week. 

One in four millennials (23 percent) said they believe it’s acceptable to inflate your income when applying for a mortgage—nearly double the result (12 percent) among Canadians in general. 

Millennials, those between the ages of 18 and 38, also tend to hold looser opinions about mortgage fraud, with 23 percent saying they believe it’s a victimless crime (vs. the national average of 16 percent).

“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 Equifax Canada’s Director of Consumer Advocacy, Julie Kuzmic.

Not only do they take fraud less seriously, but the survey found one in five millennials (23 percent) actually admitted to not being entirely truthful on a credit or loan application in the past. And that’s just the percentage that admit it. (The national average was 12 percent.)

However, Kuzmic tells Rates.ca those fudged answers don’t necessarily relate to income and cover all types of credit applications. “It could have been something like, how many years have you lived at this current address?” she said. 

Why do millennials think this way?

While respondents weren’t asked for their reasoning, Kuzmic said high home prices in the country’s hottest markets are likely a major factor. 

“We can only speculate that there’s pressure coming from the housing markets in Canada’s major cities, where there might be that sense of FOMO—fear of missing out,” she said. “If they can’t get approved for a high enough mortgage, then they can’t bid on the type of property that they want. And with so many properties going to bidding wars, there’s a risk they’re going to miss out on living where they want to.”

Steve Pipkey, co-founder of Spin Mortgage, agrees.

“It usually happens more often in a hot market when people are trying to get in before they are priced out forever,” he said. “So, definitely it's tied to increased home prices, but I wouldn't say [overstating income has] increased recently. In fact, with the stricter lending guidelines and more due diligence from the lenders I would say it's decreased.”

More factors to consider

Even though he’s seen it happen, Pipkey doesn’t agree with stereotyping an entire generation. There are many situations that lead people—of all ages—to overstate their incomes or otherwise be untruthful, he says. 

Pipkey’s partner and co-founder, Jeff Mark, said fraud doesn’t usually tend to stem from malicious intent in his experience.

“My thought is that people who aren't salaried tend to overstate their income because they're not educated on what banks require for qualification…” 

That’s especially true when their earnings are through contract work, self-employment, casual work, etc. “And it's not that they're overstating it, it's that they genuinely don't understand the requirements for qualification.”

Kuzmic says she has personally wondered about the correlation between the survey findings and career type as well, “particularly because participants in the ‘gig’ economy, by choice or otherwise, tend to be towards the lower end of the age scale,” she said. 

Consequences of fibbing on credit applications

Malicious or innocent, it’s important to remember mortgage fraud is still fraud. 

If someone was approved for a loan on fraudulent pretenses, whether due to confusion or a “little white lie,” the consequences can be anything but small. 

“One thing that can happen is people can have their names end up on a national fraud database,” which could affect their ability to apply for any kind of credit for years down the road, Kuzmic says. And we’ve seen this happen.

And even if fudgers do manage to get approved for a loan they wouldn’t have without lying, she says the risk becomes that the person can’t keep up with their mortgage payments. 

“There are potential personal consequences in the form of not being able to make your payments,” she said. Even if they can make the mortgage payments, it may come at the expense of other debt payments. “And that can take quite a hit on your credit score.”