A couple remember how their bank refused their mortgage extension request due to a pre-Christmas shopping trip to Kmart.
Kim Anderson Robb and her husband, from Dunedin on New Zealand’s South Island, are among those already affected by the amendments to the Credit Contracts and Consumer Finance Act, which went into effect on December 3.
With the aim of protecting vulnerable borrowers from loan sharks, banks are now placing more scrutiny on applicants’ spending habits before approving loans.
Anderson Robb recently applied for an $80,000 (AU$75,000) mortgage extension to help fund urgent repairs and renovations, including a moldy back deck and home wiring after asbestos was found in a fuse box.
But her 17-year-old bank rejected the loan over a one-time $187 trip to Kmart, another $100 shopping rush to buy Christmas gifts at various discount chain The Warehouse and using a credit card she hadn’t used in more than a year.
Kim Anderson-Robb was recently denied a mortgage extension by her bank due to amendments to New Zealand’s lending laws.
Ms. Anderson Robb claimed that bank employees told her they were not eligible to raise the mortgage because the couple was “spending too much”.
It was also questioned that her husband’s daily purchase of a dairy drink while he was working.
“We’ve had a mortgage for 17 years, never missed a payment, and never asked for mortgage leave, so I’d say we’re a pretty good client,” a frustrated Anderson Robb told the Otago Daily Times.
We get good money but they refused our request due to a one time trip to buy Christmas presents and a bloody drink. Stupid.
The support worker added that she had previously obtained a mortgage increase that was approved by the bank “without any problems whatsoever”.
The couple have since decided to save for urgent repairs to their home.
Kim Anderson-Robb and her husband are denied a mortgage increase after a $187 shopping spree at Kmart Invercargill (pictured)
Anderson Robb feels sorry for potential homebuyers who may now be struggling to enter the property market due to recent changes in lending laws.
“It’s just so hard and I really, really feel for them,” she said.
Auckland couple Jason and Cindy Guild’s dreams of buying a home were also shattered by the revised rules.
Their pre-approval for the loan was revoked in December, just days before they bid at an auction.
The couple was about to get a 20 percent deposit, but they were debt-exempt, had no children, and both had high wages.
“We thought this government was trying to put us in homes, but it looks like it’s not,” Mr Guild told Stuff.
“It went for $20,000 under what I would have paid for it.”
Many potential homebuyers in Kiwis are now struggling to enter the real estate market as a result of changes in lending laws that took effect on December 3rd (stock image)
New figures released by Centrix on Friday show that the proportion of approved home loan applications has fallen from 36 per cent to 30 per cent in the past month.
New Zealand Financial Advice has requested an urgent meeting with the government to address industry concerns about recent changes to the Credit Contracts and Consumer Finance Act
CEO Katrina Shank says mortgage advisors are seeing a significant drop in pre-approvals that have not been renewed and that lending levels for all borrowers are being cut due to new requirements.
“Some stories almost defy logic, such as the loan being denied or the amount reduced dramatically because you’re spending so much on coffee and takeaway,” Shank said in a statement.
For many Kiwis, all of this means that they can no longer obtain a mortgage for the same amount of credit as they could have previously been approved.
We believe that the intent of this legislation was not to reduce the availability of credit for the average nickio who was not vulnerable and could have previously afforded a mortgage.
Financial Advice New Zealand has requested an urgent meeting with the government to address concerns about changes to the law (Auckland pictured apartments)