People trying to get a loan to buy a home in Whanganui are facing too much scrutiny from lenders, mortgage brokers say. Photo / Bevan Conley
People trying to get a loan to buy a home in Whanganui are facing too much scrutiny from lenders, mortgage brokers say. Photo / Bevan Conley
Whanganui mortgage brokers say borrowers - particularly first home buyers - are being hit by a perfect storm of changes to banks' willingness to lend.
Recent amendments to the Credit Contracts and Consumer Finance Act (CCCFA) - which force lenders to put more emphasis on a borrower's expenses and abilityto pay - came into force on December 1.
The legislation was targeted at lending to vulnerable people that they might not be able to afford but mortgage brokers say it is making lenders too pedantic when they go through applicants' bank statements.
Whanganui mortgage adviser Aaron Stampa said his clients, who recently moved to Whanganui, had an offer accepted on a house but the bank halted their mortgage.
"I'm trying to mitigate what appears to be excessive dining out transactions but they've been dining out a lot because they're living with friends," Stampa said.
"Rather than put the pressure on all four of them being in the house for dinner time, my clients are going out for dinner a lot more regularly than they would when they previously owned a home."
Whanganui mortgage adviser Aaron Stampa said the CCCFA changes have led to making it much harder for local applicants to get a mortgage. Photo / File
Even after going through every transaction over a three-month period and explaining all of the discretionary spending, Stampa said the bank could still decline the applicant.
"Unfortunately, to protect the vulnerable borrowers, the responsible borrowers are the collateral damage."
Mortgage brokers are typically paid a commission by lenders when they can successfully get a mortgage over the line.
On November 1 the Reserve Bank tightened how much of a bank's lending could go to people with deposits below 20 per cent.
Stampa said a lot of the major banks were not lending to people with low deposits.
That and the CCCFA changes, combined with Christmas costs and a climate of rising interest rates, had created a "perfect storm" making it harder for first-home buyers, Stampa said.
He joined a petition, led by Squirrel managing director John Bolton, that sought to raise wider awareness about the effects the CCCFA changes were having on mortgage lending and said the subsequent Government announcement of an investigation into the CCCFA changes was a small win for those trying to get a loan.
Mortgage Link Wanganui mortgage adviser Moira Hart said the CCCFA changes were too strict and seemed to lack balance.
"It has gone to the extreme that they won't believe somebody could change when they get a house - and they're going down to finite details."
She said she had heard of mortgage approvals pulled in light of the CCCFA and LVR changes - but none of her clients had yet missed out.
Mortgage Link Wanganui mortgage adviser Moira Hart said the CCCFA changes were too strict and seemed to lack balance. Photo / Jacob McSweeny
The intent of the CCCFA was to make sure people like herself and the banks were responsible in working out a loan, she said.
"Our job so far as compliance should go is to make sure that everybody's going to be okay when they get their loan.
"That is looking at what you spend now and can any of that change for the future."
She said she was concerned by the amount of debt she saw people were carrying when they tried to get a mortgage.
"Afterpays and Zip Pay and get-now-pay-later - that's becoming a real issue out there.
"I have seen clients with five or six of these things."
Bankers' Association chief executive Roger Beaumont said he welcomed the Government's decision to look into the "unintended consequences" the CCCFA amendments were having on mortgage lending.
"Banks are caught between meeting customer needs and ensuring they comply with the law," he said.
"That's having an impact on some prospective borrowers."
The new rules were affecting people who traditionally had very low rates of failing to make repayments.
"That's still the case, but the law change has made banks' ability to lend less flexible. There's much less room for discretion than was previously the case."
Over the three years the CCCFA was being worked on, submissions on the legislation show the Government was repeatedly warned people could be cut off from mortgages they could afford.
The Bankers' Association and some of the banks that do most of the mortgage lending have put out repeated submissions warning against the inflexibility of the legislation.
