Will we see meaningful change to the lending rules which are making it so hard to buy a house?
Buying your first home shouldn’t be this hard! A First Home Grant is all well and good, but not much use if you can’t get a mortgage to buy your first home.
Minister of Commerce David Clark has set the terms for the review of the Lending Laws after significant pressure from the Banks and Media (and with the help of all of you who signed the recent petitions). The NZ Herald ran a piece on 1 Feb about the pending review. Minister Clark has indicated that the inquiry into the CCCFA will include looking at the aggregate and individual changes in consumer credit markets, lending process changes, and whether they’re likely to be short-lived or long-term. The final report is due in April. If you’re interested in reading the Terms of Reference for the review you can see them here He has set the terms of the review prior to meeting the banks and other groups who represent many of the financial industry advisers. So, the terms feel a little cart before the horse. Minister Clark has made the decision to put Ministry of Business, Innovation and Employment in charge of the review which is an interesting choice as they are not the most experienced in finance and lending. I would have thought the FMA (Financial Markets Authority) who oversee all other financial services and providers and advisers would have been a more suitable choice.
If I were cynical (and today I am feeling a little that way), I might be thinking is this what you do when you don’t really want to do a meaningful review?
The article suggests that the Minister Clark has the blinkers on to what is happening and is only looking for a review to back up his views. With this in mind, I am going to suggest that we may need to batten down the hatches and get used to the new laws as they stand today, with our fingers crossed behind our backs in the hope that the people conducting the review can see beyond the Minister’s view.
To say that December saw a seasonal drop in lending shows total lack of understanding of the markets. December in my experience has typically been a boom month!! It will be difficult to see the full stats for the applications that were not completed as loans as many financial advisers were doing the preliminary reviews of clients’ situations and advising the clients to pause before even submitting an application, as they know they will not meet the Lenders rules based on the new legislation. These unsubmitted applications would not show up in any stats that the government or banks have access to.
The great thing about working with an adviser though is that before we say “don’t waste your time” we have looked not only at the main banks but also at the alternate lenders that are out there. Not everyone understands the alternate lending market, and many of these alternate lenders will only work with Authorised agents – Financial Advisers who have completed the Lenders accreditation process. There was a time when these alternate lenders were not comparable to the banks. This is certainly not the case today! The alternate lenders are not Banks so don’t offer transactional and savings account facilities, although most do offer investment products (part of the way they get their funding for lending). Nor do they offer cash back incentives to acquire the business; in fact you will pay for the privilege to get access to their funds and almost always you will be required to show a registered valuation on the security that you are going to use. Their interest rates may be higher than the bank rates, but in recent times we have seen that sometimes they have been cheaper than the main bank rates.
If you have worked with me though you will have heard me say it is NOT about the interest rate! It is about getting access to the funds at an affordable rate in a structure that is going to support you to get done what you need (whether that is to purchase your first home, release funds for the renovation or new car, or clear debt) and then use that loan structure to get rid of your debt as fast as possible to save you money in interest!!
Regardless of what the rules are, there are often things we can do with your loans to help you get what you want, and to get rid of your debt, so talk to us.