By Riley Kennedy of
Having takeout at least twice a week or a quick bet could now, quite literally, prevent you from getting a home loan, Dunedin mortgage brokers warn.
People have long been told that they need to cut back on coffee and avocado on toast if they want to get into the real estate market. Now, a change in the law could make it a reality.
Changes made in early December to the law on credit agreements and consumer credit aimed to protect vulnerable borrowers from loan sharks.
Banks now require detailed breakdowns of applicants’ spending habits before approving mortgages.
Dunedin’s MoaMoney Mortgage and Investment Manager Asher Ingram described the new rules as a “forensic analysis” of an applicant’s bank accounts.
“Everything is in the spotlight now and it’s having a really negative impact,” Ingram said.
The law change was intended to address loan sharking, but it hit first-time home buyers the hardest.
“Most of these people are actually quite capable of having a mortgage.
“Everyone has to have a life, right? “
The “tattooing” of accounts has caused delays in approving applications, he said.
Ingram didn’t think it was the banks’ fault, saying they were just reacting to the rule change.
Ultimately, if the rules weren’t changed, it would have a negative impact on the property market, he said.
Another mortgage broker, who declined to be named, said the new rules were “incredibly difficult”.
Anything that was considered regular expenses had to be put into the debt calculator now. It increased a customer’s regular parking expenses.
Mortgage Link adviser Liam Thomas said the banks had “tightened their belts”.
It had become difficult for people to get mortgages if they had too much discretionary spending.
“It’s just impossible and really difficult to get the funding right now,” Thomas said.
Banks had warned borrowers that the change was coming, but Thomas thought they had been surprised at the magnitude of the impact.
He hoped that the government would understand the issue and change the legislation.
“It’s good that everyone is talking about it. I hope ministers will think they probably got it wrong.”
He thought the government was trying to slow the market down and it wouldn’t succeed.
“This market will only slow down when it is ready to slow down.”
When contacted, a spokeswoman for Service Minister Stuart Nash said officials were aware of the concerns and were assessing the impact of the new requirements.
“MBIE officials will engage further with lenders and consumer advocates once the new law has had a chance to take hold.”
They would inform Trade and Consumer Affairs Minister David Clark once Parliament resumed, she said.
– This story was first published on the Otago Daily Times website.