Late last year, the Reserve Bank changed assessment lending restrictions so that only 10% of bank loans could go to those with low deposits – less than 20%.
Patten said things will get better eventually, but it might take some time.
“The Reserve Bank will go back to 15% and then 20% of its lending, but it may take us another six months before we see another move, or 12 months if the market continues to be very hot.”
The next few months will tell when those restrictions begin to loosen, he said.
Kiwibank said it encourages customers to save as much as possible for a deposit.
Westpac has not withdrawn any existing mortgage pre-approvals, but any mortgage pre-approvals that expire will be reassessed and cannot be renewed.
The two noted the exemptions to the rules for those who qualify for the government’s first home grant and new builds.
But that’s not the only change that moves the goal post for first-time home buyers.
Changes to the Consumer Credit Agreements and Finance Act (CCCFA), intended to protect borrowers from loan sharks, have led banks to be overzealous in scrutinizing buyers’ finances prospects, with reports of people being turned away due to Christmas shopping bills and also many takeaways.
Financial Advice New Zealand CEO Katrina Shanks said all these changes are creating the perfect storm.
And she warned that it was particularly difficult for those who were already in the process of building a house.
“Halfway through new construction now and under new criteria, this pre-approval will be denied or significantly reduced, so for these customers they may be under intense stress in the future,” he said. she declared.
Banking ombudsman Nicola Sladden said there had been an increase in complaints about bank delays and failure to keep promises.
Complaints about denied home loan applications were also a common theme.
Trade and Consumer Affairs Minister David Clark said banks appeared to be managing their lending more cautiously, and that was likely due to global economic conditions.
“It may also be that in the first few weeks of implementing the new CCCFA requirements, there was a decision to err unduly on the side of caution.
“It must be said that a number of factors affecting the market have occurred concurrently with the changes in the CCCFA, including increases in OCR, changes in LVR and an increase in property prices and tariffs. local government,” he said.
He asked the Council of Financial Regulators to carry out an investigation to determine whether lenders are applying the laws as intended.
They will meet today, triggering a dialogue with the banks.
But in the meantime, economist Tony Alexander said there are ways to improve the odds of getting a loan approved.
“So my advice to first-time home buyers would be to adjust your spending behavior now, three months before applying for a home loan.”
Clark expected to hear from the board in the coming weeks.