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More than just ability to pay matters

An Auckland mortgage broker says she has noticed banks taking lifestyle factors into consideration much more when processing home loan applications.

Thursday, February 18th 2016, 8:03AM

Banks are now working under the Responsible Lending Code, which guides them on how to meet their Credit Contracts and Consumer Finance Act obligations.

Christine Lockie, of Auckland firm LoanPlan, said she dealt with one case where a man's full-time job required he work 60 hours a week, which raised concerns for the bank.

“He has worked this job for the last 18 months and makes good money – including from such things as shift allowances – but the bank declined his application because, among other factors, they regard his workload as unsustainable. This is becoming a typical example of how closely banks are looking at things," she said.

“To be honest, I don’t think it’s a bad thing that the banks are making calls on what is right for the customer – it is as it should be, but they are certainly much stricter than in the past. I think the marked drop in mortgagee sales may be one result of their tougher stance. On the other hand, it could also be as a result of lower interest rates."

She said banks would get information about applicants' lifestyles from a number of sources.

"Their opinion in this case was that he cannot physically sustain the pace, which may affect his income long-term. There is also always the risk of his hours being reduced to 40 hours a week, for example.

“Health has always been a factor for the banks when assessing the ability of a person to repay their mortgage, but the almost ‘predictive’ nature of this particular application – and there will certainly be others – makes it different."

She said just being able to afford a mortgage was no long enough.

“The banks are now looking ahead and assessing your ability to repay the mortgage over the long term.

“Historically low interest rates are making it easier for people to get into the housing market, but getting in is easy compared to staying the course long term, through the ups and downs, which may include rising interest rates and even health issues,” Lockie said.

She said it did not necessarily mean the man would never be able to get a loan.

“He does have other options available to him, including short term non-bank finance options that while they may be a bit more expensive than the banks, aren’t particularly onerous at the moment.

“Accepting reasonable non-bank finance over the short term is a perfectly legitimate strategy for those who are comfortable with the repayments, because it enables them to prove themselves to the banks. After a certain period, banks will then be more likely to take over the mortgage,” she said.

Tags: Responsible lending

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AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 5.79 5.49 5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 5.79 5.49 5.59
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Avanti Finance 7.90 - - -
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Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 5.79 5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 5.80 - - -
CFML Home Loans 6.25 - - -
CFML Prime Loans 7.85 - - -
CFML Standard Loans 8.80 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 5.79 5.59 5.69
Co-operative Bank - Standard 6.95 6.29 6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 5.99 5.89 -
First Credit Union Standard 7.69 6.69 6.39 -
Heartland Bank - Online 6.99 5.49 5.39 5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.15 6.50 6.30 -
ICBC 7.49 5.79 5.59 5.59
Kainga Ora 7.39 5.79 5.59 5.69
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 6.69 6.49 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 5.79 5.59 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 7.94 5.75 5.99 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.49 6.95 6.29 6.29
SBS Bank Special - 5.89 5.49 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 4.94 4.89 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.39 - - -
TSB Bank 8.19 6.49 6.39 6.39
TSB Special 7.39 5.69 5.59 5.59
Unity 7.64 5.79 5.55 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 7.70 5.95 5.75 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
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Westpac Special - 5.79 5.49 5.59
Median 7.49 5.79 5.69 5.69

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