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Changes to Responsible Lending Policies

Changes to Responsible Lending Policies

Following an announcement by Consumer Affairs Minister David Clark earlier in March 2022, lending restrictions, which were introduced in December 2021 under the CCCFA, will be changing. In response to feedback from the sector, consumers and mortgage advisers, a number of changes will be introduced to ease the controversial lending rules that have impacted creditworthy borrowers and first home buyers in particular. The announcement has received support from lenders and advisers.

Intrusive, restrictive and time consuming

Complaints about the new rules which came into force on December 1, 2021, centred on them being too restrictive, the information required too intrusive and unreasonable, and the time taken to process applications too long.

Intended to curb unscrupulous lending that left borrowers with unaffordable debt, the restrictions had the unintended consequence of stopping many creditworthy borrowers from accessing credit because of personal expenditure like a daily coffee or a shopping trip to K Mart.

Changes to lending rules will mean lenders won’t need to check current spending habits from recent transactions when assessing future spending, nor will current savings and investments be regarded as expenses.

And the requirement to obtain information in sufficient detail will only relate to information provided by borrowers directly, rather than from bank records. New guidance will be given to lenders to ensure they are able to assess what is an affordable loan.

Practical changes to curb unintended consequences

What changes can we expect to see? Minister Clark said Government was making practical amendments to curb any unintended consequences of the Act.

“The amendments we are making are informed by the feedback I received from banks, other lenders and consumers and sit comfortably within the intent of the Act.

“These initial changes ensure borrower-ready Kiwis can still access credit while we continue to protect those most at risk from predatory and irresponsible lending.”

While the details remain unclear, the changes are said to include:

  • Clarifying that when borrowers provide a detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions.
  • Removal of regular “savings” and “investments” as examples of outgoings that lenders need to inquire into
  • Clarifying that the requirement to obtain information in “sufficient detail” only relates to information provided by borrowers directly rather than relating to information from bank transaction records.
  • Providing alternative guidance and examples for when it is “obvious” that a loan is affordable.

Minister Clark said a broader investigation led by MBIE and the Council of Financial Regulators into the CCCFA amendments was ongoing.

Get first home buyer ready

Getting finance as a first home buyer can be challenging. And with upcoming changes to lending laws, you may be feeling a little out of your depth. At Mortgage Express, the team of mortgage advisers understand how confusing the home buying process can feel. That’s why we work hard to demystify the process by providing expert guidance and advice to help you make good decisions.

Whether you’re a first home buyer, looking to downsize or upsize, or an investor, find out what your options for finance may be by contacting Mortgage Express branded financial adviser.

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