Revealed: Why are banks 'going through statements with a fine tooth comb'

Banks will be looking a lot closer at spending habits. Photo / Getty Images

Banks are warning potential home loan customers new rules mean their spending habits could be under closer scrutiny.

The largest bank In New Zealand says while it may not get down to individual expenses like coffee or takeout habits it would be checking a range of categories including debts and living expenses, like food, utilities and travel.

Loans would take longer to process and one mortgage adviser told the Rotorua Daily Post it "has definitely got tougher and they are going through statements with a fine-tooth comb".

Under the Credit Contracts and Consumer Finance Act from December 1, banks are required to actively review information provided in more detail.

Harry van der Merwe from Hello Mortgage and Insurance Advisers in Rotorua. Photo / Supplied

Harry van der Merwe, from Hello Mortgage and Insurance Advisers in Rotorua, said every bank had a different affordability calculator which could quickly pick up expenses like Afterpay and Zip.

"The banks have already started going through statements and might say there has been a lot of spending at this bar. Or they are eating out three or four times a week ... so they are definitely looking at those things.''

He said it was advisable for first-home buyers in particular to have no external debt, loans, credit or Q cards.

"I tell them to have good tidy accounts and another thing is account conduct. Sometimes people may go a little over and then they pay it the next day but the banks don't really like that at all."

Rapson Loans and Finance owner Chris Rapson. Photo / NZME

Rapson Loans and Finance owner Chris Rapson agreed banks would be looking for lifestyle choices that did not match income.

Red flags could include excessive cafe, bar, dairy, alcohol and gambling expenditure.

"They have become very sensitive to that. It has definitely got tougher and they are going through statements with a fine-tooth comb."

Rapson suggested people who wanted a home loan needed to realise "how you manage your money is how they think you will manage your mortgage".

"They want to know that you can live a frugal life if you have to."

His advice was to clear debt, save hard and withdraw cash for those purchases you may not think your bank would agree with.

Kiwibank head of borrowing and savings Chris Greig. Photo / Supplied

Kiwibank head of borrowing and savings Chris Greig said prospective home buyers should have a realistic budget that takes into account regular commitments, discretionary expenditures and display good saving habits.

He said upcoming changes to the Credit Contracts and Consumer Finance Act would ensure lending was affordable for people and they would be able to meet repayments over the longer term.

An ANZ spokeswoman said lending rules as a whole had increased and while it may not get down to individual expenses like coffee or takeout habits it would be ticking off other boxes.

"We will need to check how much they spend in a range of categories, like paying off debts and living expenses, like food, utilities, travel and so on.

"While these changes will have a big impact on everyone, including customers, protecting people when they borrow money is a good thing."

But customers would need to be patient as the bank had to collect a lot more information.

"Lenders may ask for documents showing a customer's recent transaction history over at least 90 days, as well as other information that allows them to identify and verify a customer's debts and expenses. Customers may find this process more in-depth, and the same rules apply to existing customers, or if the customer is borrowing a small amount or topping up an existing loan."

Are you living a champagne lifestyle on a beer budget? Photo / Getty Images

A Westpac spokeswoman said the bank was working hard to help first-home buyers and existing home loan customers reach their homeownership goals.

She said it needed to be confident a borrower could manage regular repayments so staff talked to mortgage applicants about their spending.

"It is important we understand a borrower's income and expenses accurately so their loan is able to be serviced without putting them under stress. Like other banks we run a stress test and price in a buffer to our mortgage offers, so that if interest rates go up the customer is still able to manage their finances and service their debt."

A pre-approved loan provides a borrower confidence the bank would support their purchase up to the pre-approved amount, she said.

"It was granted after the borrower had been assessed within the bank's lending criteria."

BNZ and ASB had been approached for comment.

Tips to kick off home-buying journey

• Ask your family and friends about their home-buying experience, or seek out other people's experiences online on blogs or Facebook groups.

• Use borrowing and repayment calculators to get an idea of what you may be able to afford.

• Monitor your savings and spending to make sure you are on track.

• Set some money aside for home-buying costs like building inspections and lawyers' fees.

• Try to pay off any debt that you have. It's also important that you can show you're saving regularly.

• The goals for your first home. How soon do you want to buy? Setting a date makes it easier to plan ahead.

• Where you might live. Research a range of suburbs to get an understanding of house prices in the area.
- Source Kiwibank