Banks less willing to lend following CCCFA changes – survey of mortgage advisers

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In a January survey of 69 mortgage advisers nationwide, by Tony Alexander and, more than three-quarters of respondents (83%) say banks are less willing to lend.

When asked if more homeowners are wondering about refinancing, a net 29% said they see less, compared to a net 13% who see less in December.

More than half of survey respondents say they have seen fewer first-time home buyers and investors showing up for a mortgage, at a net rate of 52% and 57% respectively.

Former BNZ economist Tony Alexander told Newshub while loan-to-value restrictions, debt-to-income restrictions (enforced by some banks) and interest rate hikes affect borrowers, the CCCFA changes have the greatest impact.

“A lot of it is the CCCFA changes that are stopping a lot of people from buying a home,” Alexander said.

In the survey results, one adviser said the CCCFA changes had a bigger impact than the LVR restrictions and the removal of interest deductibility for investors.

“Banks are now taking a forensic look at customer spending: Trust has eroded between bank and customer about how they should live their lives,” the commentary said.

In line with changes to loan-to-value ratio (LVR) restrictions from November 1, which halved the share of homeowner loans above 80% LVR (deposit below 20%) to 10% of total loans from a bank, some mortgage advisers said fewer low-deposit loans were being approved.

Concerns were also cited about the share of rental income taken into account by banks for servicing mortgages (formerly 75%, now 60-65%).

Following the rise in the official cash rate to 0.75% in November, and amid expectations of further hikes, mortgage borrowers showed a preference for fixing a rate for two or three years, according to the results of investigation.

Asked how the CCCFA changes affect mortgage applicants, Rupert Gough, CEO of The Mortgage Lab based in Tauranga, told Newshub that a bank’s view of what a couple can spend on a month is usually “little enough”.

Since these are often small, regular amounts, expenses like Uber Eats, takeout, coffees, and memberships can easily exceed what is considered the minimum.

“It’s about looking at the little things…[applicants] don’t have to swear to eat takeout, but how many times a week do you do it,” Gough said.

Buying a few coffees a week can be okay, but if it’s a daily ritual, the monthly cost adds up quickly. Paying for a gym membership can be considered an investment in health, but since prices vary widely, mortgage seekers might consider if there is a cheaper option.

“The question is, can you do what you do in the gym for less money, even temporarily, until you have this house,” Gough added.

Banks are generally seen as responsible lenders, but they’re very cautious in responding to the changes, which don’t define who they go to, Gough said.

Earlier in January, David Clark, Minister for Trade and Consumer Affairs, told Newshub that he had asked the Council of Financial Regulators (the Reserve Bank, the Treasury, the Financial Markets Authority, MBIE and the Commission Commerce) to advance their investigation of whether the CCCFA is being implemented as intended.

“Banks appear to be managing their lending more cautiously at present, and this is likely due to global economic conditions. It may also be that in the first few weeks of the implementation of the new CCCFA requirements, a decision to err unduly on the side of caution,” Clark said.

Along with changes to the CCCFA, Clark acknowledges that changes to loan-to-value (LVR) restrictions, increases in the official exchange rate, and increases in real estate prices and local government rates have occurred roughly at the same time.

“An investigation by COFR will determine to what extent the behavior of lenders, vis-à-vis the CCCFA, is an important factor in the evolution of banks’ lending practices,” Clark added.