Mortgages fall by a third as customers fear loan rejection as banks enforce CCCFA rules

New mortgage registrations with banks have fallen by a third while a $750,000 loan fixed for a year now costs around $160 more per week than it did a year ago.

Half of the loans in
New Zealand is fixed and set to roll over in the next 12 months and an economist says rising interest rates would divert money away from sectors such as retail and hospitality.

The New Zealand Bankers Association and mortgage brokers surveyed by the NZME said tough Credit Agreements and Consumer Finance Act (CCCFA) rules introduced in December had affected home loans the most .

After complaints from borrowers and the lending industry, the government relaxed some rules last month and is considering further changes. But brokers say the rules still have an impact.

Kiwibank’s senior borrowing director, Richard McLay, said that through the end of March the number of new mortgages registered with banks was “down by about a third in the market as a whole” compared to Last year.

Its one-year rate for a home loan is 3.99% per year with a minimum down payment of 20%.

Kiwibank’s record low rate of 2.19% set for one year was available in June-July last year.

Over a 25-year term for principal and interest repayments, weekly repayments would be $910 currently versus $750 with the reduced rate.

McLay said the bank had support systems in place to protect customers and reduce the impact of rising interest rates.

This could be done through loan structures, a split or a longer peg.

“When interest rates have fallen in the past, we have encouraged clients to keep their payments at the same level to provide a buffer against rising rates.”

The latest figures from the Reserve Bank of New Zealand reveal that from December – when the tough credit rules came into effect – to February, lending to all types of borrowers with at least 20% deposit fell to 17,045 loans against 21,632 over the same period. one year ago.

Mortgage Lab chief executive Rupert Gough said it was harder to get a yes from banks for a home loan.

“At the moment banks are still going through statements and turning people away for overspending. That’s the bottom line…people are a bit afraid of being turned down.”

The brokerage was fielding more and more inquiries from potential owners, but he attributed that to “you can’t really get to the branch anymore.”

Hayley Hubbard, director of Ownit Mortgages Rotorua and a registered financial adviser, said people were looking at homes – “but buying, not so much”.

“I think the CCCFA has scared a lot of people off as to whether or not they want to inquire. likewise try.

“And some of them tidy up their accounts for no reason. They’re like ‘oh no, I have Netflix, or I want to get rid of all this laybuys and stuff,’ which you don’t necessarily need to do because you can condition for it.”

Rapson Loans and Finance owner Chris Rapson said borrowing at 6% or less gives homeowners “a head start because as the value of your property increases, your relative wealth also increases.”

He said getting loans on the line had been a “nightmare”.

“Really good people were turned away…when I thought they shouldn’t have been.”

A Bank of New Zealand spokesman said many people took advantage of low rates last year and some were fixed for five years at 2.99%.

Rates were exceptionally depressed then, reflecting heightened uncertainty around the economy due to the effects of Covid, he said.

Its fixed rate for one year was 3.99 percent.

An ANZ spokeswoman said the relationship doesn’t end once people have bought a house and she encouraged affected customers to contact the bank sooner.

She said ANZ had a special rate of 4.2% for a fixed term of one year.

Westpac’s one-year fixed rate was 3.99% and offered a cash gift of $5,000 for loans of $500,000 or more with a 20% deposit.

New Zealand Bankers’ Association chief executive Roger Beaumont said rising interest rates and changes to consumer credit rules had affected home loans.

“While we agree with the government’s goal of protecting vulnerable consumers from predatory lenders, the new rules affect responsible lenders and their customers who may be able to obtain loans before the rule change.

“The new rules have a one-size-fits-all approach for all lenders and all loan types and values, which has seriously affected people applying for home loans. The new rules require banks to collect and verify a lot more information with customers, and the prescriptive approach means that banks no longer have the same discretion or flexibility as before.

CoreLogic’s chief real estate economist, Kelvin Davidson, said pricing power in the real estate market is shifting to buyers as homes take longer to sell.

“There are more listings and a shift in mindset, especially if buyers think the price is a bit high, they will look to other properties instead.”

He agreed that loans were down and the CCCFA had played a part, as had the 20% deposit requirements, which took people longer to save.

About half of New Zealand’s loans were fixed and had to be rolled over in the next 12 months, so there was a big wave of refinancing going on, he said.

“If people have to spend more money on their mortgage, gas and food, that means more general spending in retail and stores can’t happen. It’s our duty to keep pushing interest rates up to try to get inflation under control, but at the same time there will be pressure on the economy.”

Last month, the Minister for Trade and Consumer Affairs, David Clark, announced that the government was making practical changes to the CCCFA, including clarifying that it was not necessary “to investigate [borrowers’] current living expenses resulting from recent banking transactions”.

The Department for Business, Innovation and Jobs said in a statement that in light of concerns over the CCCFA changes, its officials were also taking a closer look at the initial implementation, in consultation with d other members of the Board of Financial Regulators.

The objective of the survey was to identify the impacts and to assess, if necessary, the additional actions needed.