What does it mean for Kiwis wanting to pick up property?
The number of loan approvals was down during February three months after responsible lending law changes were introduced in December.
Commerce and Consumer Affairs Minister David Clark announced a range of small changes to the Credit Contract and Consumer Finance Act (CCCFA) recently in response to a number of New Zealanders who were unable to obtain credit who would have been able to previously.
Centrix chief commercial officer Monika Lacey (pictured) provided an update from the national credit bureau.
“With external pressures currently affecting the market, it makes it challenging for Kiwis to obtain credit from advisers. With mortgage rates decreasing, it is providing some uncertainty in the market,” Lacey said.
Read more: Financial Advice NZ calls for minister to review impact of CCCFA
The Reserve Bank of New Zealand increased the official cash rate in early March, which signalled further increases were coming.
“The increase was not unexpected given the current inflationary pressure, however it does signal an end to record low interest rates Kiwi businesses and consumers have enjoyed during recent years,” said Lacey.
Additionally, there were tighter LVR restrictions which combined to slow the housing market with the value of new residential mortgage loans decreasing to 21%, compared to January 2021.
“We have compiled data to show the highest credit scores that have been impacted the most. Despite rising interest rates, mortgage arrears are remaining low due to the large volume of fixed mortgages,” said Lacey.
Following the CCCFA restrictions in December, there was an impact on loan conversions with credit approvals for mortgage loans and consumer finance impacted negatively.
“Approved mortgage applications fell to 34% last month while consumer finance conversion fell from 35% to 28% of applications. This is a fast decline in the space of three months,” Lacey said.
In January 2022, residential mortgage loans fell 21% compared to January 2021.
“There are quite a few factors at play which have resulted in this,” she said. “The low number of approved home loan conversions, along with rising interest rates and tighter LVR restrictions are likely to have impacted this figure.”
Lacey said Centrix NZ is optimistic about the new financial year, despite external pressures and the recent COVID outbreak.
