Whanganui mortgage adviser urges first home buyers to tighten spending

First home buyers are certainly going to notice the difference in how much banks will lend them, mortgage adviser Aaron Stampa said. Photo / Bevan Conley

Mortgage applicants will have to keep a close eye on how much they're spending on things like takeaways and alcohol after a tightening of lending rules, a Whanganui mortgage adviser says.

Amendments to the Credit Contracts and Consumer Finance Act (CCCFA) - which force lenders to put more emphasis on a borrower's expenses and ability to pay - come into force on December 1 this year.

Whanganui mortgage adviser Aaron Stampa says he is already seeing banks applying those new rules "as a soft release".

Typically when someone applied for a mortgage before the CCCFA changes, Stampa says, he would budget-plan with them to figure out their approximate costs for things like groceries and takeaways.

"Now what we're going to have to do is we're going to have to average that spending out over the last three months and then we have to carry that forward for future expenses once the new mortgage is in place.

"Those first home buyers that are living at home with Mum and Dad at the moment and waiting to find that first home, they're probably pretty relaxed about how much they spend dining out and on alcohol and takeaways and that sort of thing because they've got that disposable income.

"First home buyers are certainly going to notice the difference in how much banks will lend them," he said.

The fact interest rates were rising after the OCR increase earlier this month would also make it slightly harder for first home buyers already in a difficult housing market, Stampa said.

"I'm picking what we're going to see in the broker space is, we're going to see first home buyers being told 'you've got to tidy up your spending habits, come back and see me in three months'.

"The takeaways, the discretionary spending, are going to start to have an impact on how much they can borrow."

Stampa's advice for people wanting a new mortgage was to cut their discretionary spending for three months to improve their chances of getting approval for a loan.

First home buyers, in particular, had to consider the extra costs involved with being a homeowner and factor that in with their current spending, Stampa said.

"So, for example, a first home buyer who's never owned a property before - are they aware of how much their rates are going to be?

"Are they aware of their house insurance, are they aware of the additional costs of owning a house?"

First home buyers were usually aware of the sacrifices they had to make once they became homeowners, Stampa said, but now they needed to start making those sacrifices before applying for a loan.

"That's where we're going to start seeing issues, which is going to make it tough."