National's plan to fix home loan crunch caused by new responsible lending rules

Wednesday, 9 February 2022

Nicola Willis is calling on the Government to adopt a law for a quick-fix to the unintended consequences of new responsible lending regulations.

National has drafted a law it says could undo the damage new responsible lending regulations have done to borrowers’ chances of getting a home loan.

National Housing Spokesperson Nicola Willis said she had written to Commerce and Consumer Affairs Minister David Clark asking he urgently adopt Andrew Bayly’s private members’ bill.

Critics of the new regulations, which came into force on December 1, say they are too prescriptive, and have resulted in some people no longer qualifying for home loans banks they would have previously been granted.

Willis said: “The regulations have resulted in banks engaging in intrusive auditing of potential borrowers’ spending histories and Kiwis having their loan applications rejected for absurd reasons like buying takeaways too often, subscribing to Netflix or going to therapy.”

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She said the regulations were supposed to target predatory and high-risk lenders, not to force heavily-regulated banks to reduce their mortgage lending.

Bayly’s draft law would alter the regulation-making powers of the Credit Contracts and Consumer Finance Act to allow for different regulations for different kinds of lenders.

That would make it possible to have tighter, more prescriptive responsible lending rules for lower-tier lenders like payday lenders, while leaving banks more lightly-regulated.

National’s commerce spokesman Andrew Bayly has drafted a law he says could preserve defences against predatory lenders, while not constraining banks from making home loans to non-vulnerable borrowers.

“The Government has taken a blanket approach which subjects banks to the same set of highly prescriptive and draconian regulations as high-risk pay-day lenders, despite banks already being subject to an overarching set of mortgage lending standards enforced by the Reserve Bank,” Willis said.

“There is a categorical difference between regulated financial institutions issuing long-term mortgages at low interest rates and other types of higher-risk, shorter-term loans issued by other lenders for different purposes,” Willis said.

The draft bill would require the minister to take their differing scale and risk profiles into account when setting regulations for their lending activity.

“We want to work with the Government to get this legislation passed. This an immediate issue with the hopes and financial futures of thousands of Kiwis at stake. We urge the Government to properly consider our proposal,” she said.

Bayly’s bill is called the Credit Contract and Consumer Finance (Reasonable Inquiries by Regulated Financial Institutions) Amendment Bill.

Following face-to-face meetings with Clark last week, the chief executives of both ANZ and ASB have made public claims about what proportion of home loan applications their banks have had to decline since December 1, which they would previously have approved.

ANZ’s Antonia Watson said it was six in every 100 loans, while ASB’s Vittoria Shortt said it was seven in every 100.