The proposed changes to the CCCFA came into effect on July 7, 2022, addressing some of the challenges that borrowers have faced since the code was first enacted in December 2021. Home buyers who were previously blocked from lending under the original code could now find themselves with borrowing capacity. And while they will still need to show how spending and saving is controlled in their budget, the CCCFA amendments could make things easier for first home buyers trying to get into the property market.
Addressing the issues
When the amendments to the Credit Contracts and Consumer Finance Act were enacted on December 1, 2021, lenders were personally held liable for irresponsible lending. As a result, most lenders tightened lending policies to the point of ultra-conservatism, shutting out a large proportion of borrowers who previously would have been approved.
In the updated responsible lending code, which came into effect on July 7, 2022, some of the major issues are being addressed, including:
- Savings and investments will no longer be considered ongoing expenses.
- Previous spending habits will no longer be regarded as future spending habits.
- There is more clarity around what constitutes sufficient surplus.
CEO of REINZ, Jen Baird welcomed the tweaks to the CCCFA and said, “These changes may encourage prospective buyers to reconsider their opportunities within the market. We look forward to the wider review of the consumer credit regime — due this month — to see what further changes are considered and the effect on borrowers and lenders.”
Support to get into the market sooner
Changes to the CCCFA, a general slow-down of house price increases across parts of New Zealand, and amendments to Government’s First Home Grant and First Home Loan point towards a shift in favour towards aspiring first home buyers.
According to CoreLogic, half of the country’s suburbs experienced a drop in house prices over the last three months, which could mean a significant difference to the amount of deposit and loan required by many first home buyers.
Sales activity has slowed in some areas and properties are taking longer to sell, resulting in more homes on the market and more options for first home buyers with greater scope to negotiate on sales price.
This year’s budget offered more financial support for first home buyers, with an increase to house price caps for the First Home Grant, and the removal of house price caps from the First Home Loan, along with further funding being made available for both initiatives.
A step in the right direction
For first home buyers grappling with the frustration of trying to buy their “Kiwi dream” home, the changes to the CCCFA are a step in the right direction. Recent changes to Government’s first home buyer schemes are positive, and the slow-down in house price increases means home buyers have more time to consider their options.
If you would like clarity on how amendments to the CCCFA impact your ability to borrow, seeking expert advice from a mortgage adviser could help you reach your goal sooner than you think. Contact a Mortgage Express branded mortgage adviser today to find out more about your options for finance.