Following a recent review, the Government announced three new changes to the borrowing rules (CCCFA) that were introduced last year, to fix some “unintended consequences”. It’s the second round of tweaks after the first round in July 2022.
The changes are expected to take effect in March 2023, and would impact anyone borrowing money in New Zealand – including new mortgage applicants and homeowners wanting to use the equity in their home for renovating the property. Read on to learn more.
The unintended consequences of the initial CCCFA changes
According to the Government’s review, the CCCFA changes introduced in December 2021 essentially made it too difficult for Kiwis to access safe, responsible, and affordable lending.
The review found that borrowers are facing unnecessary and disproportionate inquiries, and many who would have previously passed the affordability test are now being declined or only approved for smaller loans. As Commerce and Consumer Affairs Minister David Clark explained, some borrowers were seeing their loans declined due to having spent money on takeaways and streaming services, which “was not the purpose of the CCCFA.”
Coupled with the reintroduction of LVR restrictions, the initial CCCFA changes have seen many first-home buyers leave the market, according to a survey conducted earlier this year. The question now is, will the new amendments give buyers more options?
How the Government plans to address these issues
Here are the three key changes announced by the Government:
- Narrowing the expenses considered by lenders – the new rules will more explicitly exclude discretionary expenses;
- Relaxing the assumptions that lenders were required to make about credit cards and buy-now-pay-later schemes – lenders will have more flexibility as to how repayments are calculated;
- Helping make debt refinancing or debt consolidation more accessible if appropriate for borrowers.
So, what’s next? The changes are expected to be finalised in early February and come into effect by mid-March 2023. But before then, the Ministry of Business Innovation and Employment (MBIE) will consult on the finer details.
Do you have a property move in mind?
Whether you’re a first-home buyer or a homeowner looking at borrowing against the equity in your home to fund a renovation – get in touch.
With house prices dropping in most regions and borrowing rules potentially relaxing, now could be a good time to start exploring your options. As mortgage advisers, we know the lending landscape inside and out, and can help you make an informed decision about your property journey.
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