Fear the loan rules will hit first-time homebuyers harder

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Kiwis will have to get better at tracking their spending. Photo / Getty Images

Having take out at least twice a week or a quick bet could now literally keep you from getting a home loan, Mortgage Brokers in Dunedin warn.

People have long been told that they have to cut back on coffee and avocado on toast if they are to enter the real estate market. Now a change in the law could make this a reality.

Changes to the Credit Deeds and Consumer Finance Act in early December were aimed at protecting vulnerable borrowers from loan sharks.

Banks now require detailed breakdowns of applicants’ spending habits before approving mortgages.

Dunedin’s MoaMoney Mortgage and Investments director 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 deal with loan sharks, but it hit first-time homebuyers the hardest.

“Most of these people are actually very capable of having a mortgage.

“Everyone has to have a life, right?

The “nitpicking” of accounts has resulted in delays in approving applications, he said.

Ingram didn’t think it was the banks’ fault, saying they were only reacting to the rule change.

Ultimately, if the rules were not changed, it would have a negative impact on the real estate market, he said.

Another mortgage broker, who declined to be named, said the new rules were “incredibly difficult”.

Anything that was considered regular expenses now had to go through the debt calculator. He traced a customer’s usual 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 Mr Thomas thought they were surprised at the scale of the impact.

He hopes the government will see common sense on the matter and change the law.

“It’s good that everyone is talking about it. Hopefully the ministers think they probably got it wrong.”

He believed that the government was trying to slow down the market and that it would not be successful.

“This market will only slow down when it is ready to slow down.”

When contacted, a spokesperson for sitting Minister Stuart Nash said officials were aware of the concerns and were assessing the impact of the new requirements.

“MBIE officials will engage more with lenders and consumer advocates once the new law has had a chance to integrate.”

They would notify Trade and Consumer Affairs Minister David Clark once Parliament resumed, she said.

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