Government makes home loan application process easier
Prescriptive loan affordability requirements have been removed from Credit Contracts and Consumer Finance Act (CCCFA) regulations, as of 31 July.
Lenders are still required to make reasonable inquiries to assess the affordability of a loan and keep good records of their affordability assessments to demonstrate compliance with the CCCFA.
However, the detailed requirements for how lenders must conduct affordability assessments have been removed.
As a result, lenders now have the flexibility to assess affordability on a case-by-case basis, taking into consideration individual circumstances.
The Responsible Lending Code has been revised accordingly.
Home loans applications likely to be smoother
Housing Minister Chris Bishop said these reforms would make it easier for consumers to qualify for finance.
“The affordability regulations stipulated very specific requirements a customer had to satisfy before being able to take out a loan. The hoops customers had to jump through resulted in a confusing and stressful process,” he said.
“Not only was it inefficient and frustrating for customers, but it also significantly increased the burden of compliance, leading to increased costs for lenders. This had a particularly chilling effect on lenders’ ability to offer small loans of under $5,000.
“Many Kiwis who applied for home loans while the regulations were in place will remember the immense stress caused by the screeds of information and disclosures they had to provide. The regulations treated people like children and required lenders to do things like check whether the information provided by an applicant about their personal expenses was in line with information held by Stats NZ about the cost of living. They had to explain why they bought an occasional coffee, or why they treated the family to fish and chips every now and again, even when they could clearly afford to.”
Mr Bishop said the new rules still required high standards from lenders, and penalties would be levied on lenders that failed to make reasonable inquiries about the potential affordability of loans.
Banks show their support
New Zealand Banking Association chief executive Roger Beaumont said banks welcomed the Government's reforms.
“Banks are responsible lenders and take their obligations under the law and to their customers seriously. The change still means that consumers are protected, and lenders need to be responsible,” he said.
“This is a good first step in the process of amending the CCCFA. Banks look forward to engaging with the government in the next phase.”
I can help you get a home loan
As Minister Bishop said, it’s likely that the home loan application process will be smoother under the new rules. That’s good news.
Please get in touch if you’d like to buy a home or investment property in 2024. I’ll compare the market for you, recommend a loan that suits your unique needs and manage the application process for you.