Mortgage broker John Bolton has called for a rethink of lending law changes.
John Bolton, the frustrated CEO of mortgage advisory firm Squirrel, has launched a petition to rewrite lending laws that he says will make it harder for ordinary couples to buy homes, and make it more expensive to get loans.
The law changes took effect on December 1, and are designed to protect vulnerable borrowers from unscrupulous or negligent lenders. The changes require lenders to take additional steps to prove that loans are affordable. But Bolton said they would reduce the borrowing power of first home buyers.
The petition is addressed to Commerce Secretary David Clark, and by 10.40 a.m. Monday morning 10.40 a.m. Monday, it had 1,690 signatures. Some left stinging messages of support.
“I can see first-hand the damage this legislation will do to the entire brokerage industry,” John Schell of SurePlan Financial wrote after signing the petition.
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Mortgage broker Steve Holbrook posted “These new laws are working against the New Zealand public.”
Bolton said the law now requires lenders to “dive into the details” of borrowers’ lives in a way they haven’t had before, which has helped spur a wave of “ultra-conservatives” among banks.
Finance and Expenditure Committee / Facebook
Reserve Bank Governor Adrian Orr expressed concern in August about what new homebuyers might soon be in, and since then prices have gone up rather than down.
In support of his petition, Bolton wrote: “This has dramatically increased the time and effort to process a home loan from five working days to more than 15 working days.
“It has increased paperwork and inefficiency, and will result in a charge on consumers. New home borrowers can expect to pay incorporation fees from $500 to $1,000.”
“It will reduce the borrowing power of early homebuyers,” he said.
The changes came as first home buyers already had to contend with value constraints imposed by the Reserve Bank of New Zealand, Te Pūtea Matau, and could soon face debt-to-income constraints as well.
He said the changes would also affect New Zealand small business owners who would find it increasingly difficult to raise capital using their family home.
Bolton said the changes to the lending law are meant to protect at-risk borrowers, not hinder people who buy homes.
“When it comes to housing loans, there is no problem with fixing,” he said. “ANZ which has 30 percent of the market has a home loan arrears rate of 0.50 percent.”
He cautioned that the effect could be felt more widely by first home buyers.
“If you have an emergency, you have good luck trying to borrow from the wealth that is tied up in your home,” Bolton said.
“It would be almost impossible to own a home and have children,” he said.
“This is a government-caused credit crunch that will deny small businesses access to capital only when they need it,” he said.