A non-bank lender says it will not “check how many coffees” home loan borrowers are borrowing, the first sign of a second-tier lending market moving to capitalize on banks’ reluctance to lend under the new rules.
Resimac said its priority is to comply with new rules under the CCCFA without adding unnecessary obstacles to customers.
“For those with a strong debt service position, choosing how many cups of coffee they have per week or withdrawing them for too many savings in the booth over Christmas is not a position we would like,” Resimac General Manager Luke Jackson said. .
But mortgage broker John Bolton warned that borrowers face higher interest rates if they choose non-bank lenders, and that those lenders will “grow exponentially” under the new rules.
*First home buyer says he ‘lived like a hermit’ to get approval under new mortgage-lending rules
Commerce Secretary David Clark orders investigation into low lending levels
* Credit Crunch: Mortgage Brokers Respond to Lending Rule Changes
Homeowners today may pay 3.6 or 3.7 percent with the bank. They could pay anywhere between 4.5 percent to 7 percent with an unbanked, so there would be much higher interest costs.
Bolton, CEO of mortgage brokerage Squirrel and previously general manager of products at ANZ, said outside expertise suggested rule changes like those in the CCCFA that increased non-bank firms’ share of the home loan market from 3 to 7 percent.
Resimac’s standard online mortgage rates range from 4.96 percent to 5.96 percent with a two-year fixed rate, depending on the size of the applicant’s deposit.
Other than the higher costs, Bolton said, the growth of non-bank lenders has not necessarily created any other risks for the housing market.
Jackson referred to the new CCCFA rules as an “industry-wide bottleneck in pre-approvals for banks”.
Resimac has launched a new option for faster pre-approvals for broker-provided clients, which goes beyond checking a bank statement.
“Resimac’s innovative use of benchmarking to assess an applicant’s expenses means that it does not need to scrutinize their spending habits in detail, and instead uses big data to understand their projected expenses,” Jackson said.
Bolton had expected non-bank lenders to respond more quickly to the new regulations, because under the CCCFA, senior bank managers and directors could be personally fined $200,000 if their bank did not comply with the rules.
Because the banks were so large, there could be up to five steps between the banker on the ground giving the loans, and the CEO who was personally liable if the loan didn’t comply, he said.
He said that non-bank lender executives were generally closer to the procedure and would therefore feel more secure in signing the loans.
Bolton initiated a petition to encourage a reformulation of the CCCFA that garnered nearly 10,000 signatures.
Independent economist Tony Alexander said banks’ reluctance to lend was reflected in recent surveys of mortgage brokers that found in July that there was only a slight tendency for mortgage advisors to respond, saying banks were becoming less willing to lend.
By December, more than 90 percent of mortgage advisors reported that lenders were less willing to make loans.
Credit reporting agency Centrix reported last week that the number of mortgages issued per month fell by about a quarter (23 percent) after the CCCFA took effect, dropping from about 30,000 per month to an average of 23,000.
Recent news stories about the impact of the CCCFA on include one person who was told they spent too much money on their dog, and another couple who lost their informed consent before the auction and witnessed the property being sold for less than they were willing to pay.