Lending conversions down, advisers working harder than ever
National credit bureau Centrix has released its March indicator report, highlighting Kiwi consumer uncertainty as the biggest factor impacting New Zealand’s credit landscape.
An overall decline in demand and lending conversions is occurring, along with Omicron cases, a retreating housing market, increasing mortgage rates, and rising inflation – all of which are affecting Kiwi spending habits.
Since the CCCFA changes came into effect on 1 December, conversion rates have dropped for all major loan types with 5% of new applicants rejected. These customers would have qualified in November before the act was changed.
Falling house prices combined with lower sales, rate hikes, and new lending restrictions appear to be the key drivers of this decline in demand.
As a result of the Omicron outbreak, company closures were down 35% as business owners made decisions around price increases to help stay afloat, with these costs inevitably passed onto consumers.
Read more: CCCFA regulation changes impact loan approvals
The value of new mortgage lending was down 23% in February, compared to February 2021.
New lending across consumer loans was down 26% year-on-year as conversion rates and decreased approval numbers had a negative impact. Meanwhile, mortgage applications were down 19% year-on-year.
“Lending conversions began declining in December with the introduction of the new CCCFA regulations. Rates have continued to do so through to March, however, the CCCFA minister has said they will review the changes in June this year,” said Centrix managing director Keith McLaughlin (pictured above).
McLaughlin said New Zealanders had three months of uncertainty and lenders would be making minimal changes to checks and balances before lending to new customers.
“It’s not just home lending, it is across the board. Businesses have needed to adjust quickly to this new normal,” he said.
McLaughlin said personal loan arrears were increasing due to a rising cost of living which is having an impact on households’ available cash.
“We are paying more for food, petrol and non-discretionary household spending,” he said. “People prioritise where their money goes but now there is less money to go around.”
Read more: Advisers predicting another interest rate rise
McLaughlin said an adviser’s role was harder than ever due to uncertain credit confidence.
“The housing market is slowing down and home lending is dropping year-on-year, so advisers have less opportunities to earn a commission,” he said.
“Having said that, many lenders are not changing lending patterns because of the CCCFA regulations up for review, so advisers need to do their homework and frame and facilitate the right deal for their client.”
