It could be much harder for Australians to get a mortgage when the current banking royal commission is over.

Banking analysts say stronger income assessment and reviews of living costs could largely eliminate the false applications and questionable loans uncovered at the commission, but would also dramatically reduce credit availability – especially to lower income households.

That could also lead to a steep fall in property prices and a significant economic downturn, UBS analysts said in a report on Friday.

The royal commission is not due to issue its interim findings until September, but UBS said the banks are likely to rein in irresponsible lending following their public shaming.

‘Evidence has been presented of fraud, bribery, false documentation, failure to verify customer income, not assessing expenses, failure of internal controls, and failure to report misconduct to ASIC,’ UBS said.

”Keep calm and carry on’ looks increasingly difficult.’

UBS said its base case was still for a slow and modest tightening of credit conditions – with the wealth effect from increased property prices fading away, but offset by a boost from household tax cuts and global growth.

Nonetheless, it said underwriting standards appeared to have been lax for some time and that it believes banks will tighten standards to ensure they fully comply with regulation.

‘While a tightening of mortgage underwriting standards is prudent … it has a material impact on the economy,’ the report said.

‘It must be remembered that house prices are determined by the demand and supply of credit – not the demand for and supply of housing.’