New lending rules confusing aspiring homeowners

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PHOTO: A couple hoping to buy a house this year say they are worried about what costs may stop the bank from lending them a mortgage. (File image) Photo: RNZ / Nate McKinnon

Aspiring homeowners are locking up their lives – including possibly cutting health costs – to try increase their chances of getting loans approved by banks under stricter rules.

The Council of Financial Regulators is investigating whether changes to the Credit Contracts and Consumer Finance Act (CCCFA), which came into effect in December, have been implemented as intended.

Banks less willing to lend

Amelia* and her husband, who only became aware of the changes to lending rules shortly before they kicked in, were picking apart their spending in hopes of being able to buy a home this year.

They were worried about what costs could trip them up.

For Amelia, that included concern about her ability to regularly see a therapist for her mental health – something she just got off the long waitlist for.

“The fact that I, as a person, have to think ‘should I get therapy or should I get a house?’, I think that’s really problematic.”

There was an overarching umbrella of confusion: Amelia did not think the CCCFA rules were clear or easy to understand as a consumer.

She said it felt like “you can’t have any extraneous joy in your life that is surplus to need from the bank’s eyes so you should just live this life of: you work, you go to the grocery store, you make your food, you never go out to eat, you don’t see your friends and you just sit in your house until you can buy a house”.

Jared* had similar feelings.

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He and his wife purchased a new house off the plans about a year ago and were pre-approved a home loan, which had since been renewed every few months.

He said they had to “redo the whole process” once the rules changed, “and then [the bank] gave us quite a vague email that said ‘oh yeah, we’ll do it again just before you settle but it should be okay'”.

Jared said their house was now “almost finished”, but the email “didn’t give us too much reassurance”.