Commerce Minister David Clark rejects National's plan to restore homebuyers' borrowing power
Thursday, 10 February 2022
Commerce and Consumer Affairs Minister David Clark has rejected a National Party proposal that the Opposition says would undo the damage new responsible lending regulations have done to borrowers’ chances of getting a home loan.
Critics of the regulations, which came into force on December 1, say they are too prescriptive, and have resulted in banks rejecting more home loan applicants.
On Wednesday, National housing spokesperson Nicola Willis wrote to Clark asking the Government to urgently adopt a draft law from National commerce spokesman Andrew Bayly.
Bayly’s proposed law would allow tighter responsible lending regulations for lower-tier lenders to prevent them lending too much to vulnerable borrowers, and lighter ones for banks.
**READ MORE:
* National's plan to fix home loan crunch caused by new responsible lending rules
* Lending slow-down: Government stuff-up or lenders crying wolf?
**
Clark said National’s proposal would cause unnecessary delays in dealing with the matter.
“Quite aside from the time it would take to draft new regulations, and consult with the banks and other lenders, the approach you propose would result in undue delay to consumer benefit from possible tweaks that could be made to regulations and guidance in the nearer term,” he said.
“Based on my meetings with the banks last week, I detect little enthusiasm for an entirely new set of rules for banks, and other regulated lenders.”
“Banks have suggested small tweaks that could be made to ensure the purposes of the legislation are best met,” Clark said.
Antonia Watson, chief executive of ANZ, and Vittoria Shortt, chief executive of ASB, have both spoken about their meetings with Clark.
Both said they were optimistic that changes to the regulations would be made, and that the minister understood the material impact on mortgage lending, which has seen them turn down people for loans they would have approved before the new regulations came in.
They said changes could be made that would not defeat the intent of the regulations, which was to prevent unscrupulous lower-tier lenders preying on vulnerable borrowers and luring them into unaffordable debt, and financial hardship.
Clark ordered an inquiry in January after data appeared to show a sharp increase in December in the proportion of loan applications by banks and other lenders being declined.
It wasn’t the only change to lending rules taking effect. The Reserve Bank of New Zealand Te Pūtea Matua introduced tighter restrictions on low-deposit lending by banks in November.
The full inquiry, which is being conducted by officials from the Ministry of Business, Innovation and Employment, is expected to be completed in April, but Clark said he had asked officials to give him initial advice in mid-February.
Clark said it was crucial people were prevented from taking on unaffordable debt.
He said while mortgage lending was lower in December than the Reserve Bank had forecast, first-home buyers were taking out a greater proportion of the home loans issued, compared to other owner-occupiers and investors.
Reserve Bank lending data showed total lending commitments at $7.9 billion, down from the bank’s forecast of $8.3b to $8.6b, he said.
Clark said that drop in lending also suggested the rules might be working “as they should, to stop those on the margins from taking up unaffordable debt”.
Willis said the regulations had 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.
She said the regulations were supposed to target predatory and high-risk lenders, not to force heavily regulated banks to reduce their mortgage lending.
“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,” she said.