AUCKLAND (CU)_As the Credit Contracts and Consumer Finance Act came into effect on 1 December, there has been widespread reluctance among banks in New Zealand to lend under the new home loan rules. According to recent data issued by credit bureau Centrix, only 30 per cent of home loan applications submitted last month resulted in loans, a drop from 36 per cent prior to the new law. Although the CCCF Act was aimed at protecting vulnerable borrowers who were taking out large loans, it has resulted in many borrowers are being shut out of the housing market instead.
Accordingly, the second-tier lending market is now moving to capitalise on this situation, claiming that they do not intend to add unnecessary hurdles for customers. Commenting on the effects of the new rules, chief executive of Financial Advice New Zealand, Katrina Shanks, noted that while the intention of this legislation was not to reduce the availability of credit for the average Kiwi who was not vulnerable, it has in fact led to unintended consequences. “Some of the stories almost defy logic, like being refused a loan or having the amount cut drastically because you’re spending too much on coffees and takeaways,” she said.
Meanwhile, none-bank provider of home loans, Resimac claims that it will not “nit-pick over how many coffees” the borrower has, since its priority was to only comply with new rules. “For those with a strong debt servicing position, nit-picking over how many coffees they have per week or pulling them up for having too many Cab Savs over Christmas is not a position we’re interested in taking,” Resimac general manager Luke Jackson said.
The lender has already launched a new faster pre-approvals option for broker-introduced customers, under which the applicant can bypass the bank statement scrutiny. “Resimac’s innovative use of benchmarking to assess an applicant’s expenses means that it doesn’t need to scrutinise their spending habits in detail, and instead utilises big data to understand their expected outgoings,” Jackson said.
According to John Bolton, chief executive of mortgage brokerage Squirrel, non-bank lenders were expected to respond more quickly to the new home loan rules, since senior bank managers and directors could be personally fined $200,000 under the CCCFA, if their bank failed to comply with the rules. The executives of non-bank lenders, on the other hand, were generally closer to the action, which means they would feel more secure in signing loans off, he said.
