Rupert Gough, founder of Mortgage Lab, discusses stricter lending laws. Video / NZ Herald
New home mortgages have fallen by a third, and a $ 750,000 one-year loan costs about $ 160 a week more than a year ago.
Half loans inside
New Zealand has been fixed and is about to be converted within the next 12 months and an economist says interest rate hikes will divert money away from areas such as retail and hospitality.
The New Zealand Banking Association and mortgage brokers NZME spoke to said the harsh rules on credit agreements and the Consumer Financing Act (CCCFA) introduced in December had a greater impact on lending.
Following complaints from borrowers and the lending sector, the government relaxed some rules last month and is investigating further changes. But realtors say the rules still have an impact.
Kiwibank Senior Lending Director Richard McLay said that by the end of March, the number of new mortgages registered with banks was “less than about a third in the market” compared to last year.
The one-year mortgage rate is 3.99 percent per annum with a minimum deposit of 20 percent.
Kiwibank’s record low interest rate of 2.19 percent fixed for one year was available in June-July last year.
Over a period of 25 years for principal and interest repayments, the weekly repayments will now be $ 910 versus $ 750 at the low interest rate.
McLay said the bank has support systems in place to protect customers and reduce the impact of interest rate hikes.
This could be done through loan structures, separation or repair for a longer period of time.
“When interest rates fell in the past, we encouraged customers to keep their payments the same to create a reserve against rising interest rates.”
The latest data from the Reserve Bank of New Zealand reveal that from December – when strict credit rules began – to February, loans to all types of borrowers with a deposit of at least 20% fell to 17,045 loans from 21,632 in the same period a year ago. .
Mortgage Lab CEO Rupert Goff said it was harder to get a yes from banks for a mortgage.
“Right now the banks are still flocking to statements and reducing people to overspending. This is unlikely … people are a little afraid of being rejected.”
The brokerage asked more questions from potential homeowners, but counted on the fact that “you can no longer just go to the branch.”
Ownit Mortgages Rotorua’s director and registered financial adviser Hailey Hubbard said people were looking at homes – “but they were buying, not so much”.
“I think the CCCFA has scared a lot of people about whether or not they want to ask. I’ve noticed a lot of discussions in the industry and from clients who want to stop for three months and settle their accounts before you even try.
“And some of them settle their accounts for no reason. It’s like ‘oh no, I have Netflix, or I want to get rid of all these laybuys and more’, which you do not necessarily have to do because you can.”
Rapson Loans and Finance owner Chris Rapson said his view was that lending at 6 percent or less puts homeowners ahead of the game because as the value of your property grows, so does your relative wealth. “.
He said taking some loans across the line was a “nightmare”.
“Very good people have been rejected … when I thought I should not.”
A spokesman for the Bank of New Zealand said many people took advantage of low interest rates last year and some stabilized for five years at 2.99%.
Rates were unusually tight at the time, reflecting growing uncertainty around the economy due to the effects of Covid, he said.
The interest rate set for one year was 3.99 percent.
An ANZ spokeswoman said the relationship did not end when people bought a home and encouraged interested customers to contact the bank in a timely manner.
He said ANZ had a one-year fixed interest rate of 4.2 percent.
Westpac’s one-year fixed interest rate was 3.99 percent and offered a $ 5,000 cash gift for loans of $ 500,000 or more with a 20 percent deposit.
Roger Beaumont, chief executive of the Bank of New Zealand Bankers Association, said rising interest rates and changes in consumer lending rules had affected real estate lending.
“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 could take out loans before the rule changes.
“The new rules have an approach that suits everyone for all lenders and all types and values of loans, which has seriously affected people applying for mortgages. The new rules require banks to collect and verify much more information from customers and The binding approach means that banks do not have the same discretion or flexibility they once had.
CoreLogic chief real estate economist Kelvin Davidson said the power of prices in the real estate market is being passed on to buyers as homes take longer to sell.
“There are more listings and a change of mindset, especially if buyers think the price is a bit high, they will look at other properties instead.”
He agreed that lending was reduced and while the CCCFA had played a role, so did the 20% deposit requirements, which took longer for people to save.
About half of the loans in New Zealand were repaid and were due to expire in the next 12 months, so there was a big wave of refinancing on the way, he said.
“If people need to spend more money on mortgages, petrol and food, that means more general spending can not be made on retail and in stores. It is our duty to keep raising interest rates to try to “We control inflation, but at the same time there will be pressure on the economy.”
Last month, Commerce and Consumer Affairs Minister David Clark announced that the government was making practical changes to the CCCFA, including clarifying that there was no need to “investigate [borrowers’] current living expenses from recent banking transactions “.
The Ministry of Enterprise, Innovation and Employment said in a statement that, in the light of concerns expressed about changes in the CCCFA, its officials also considered the initial implementation more closely, in consultation with other members of the Council of Financial Authorities.
The aim of the research was to identify any effects and to assess what, if any, further action was needed.