Library fines kept the family on the fringes of the New Zealand real estate market

Reports of first-time homebuyers being denied home loans under tough new loan laws bring back bad memories in Wiremu Bayliss.

Mortgage brokers say new responsible lending laws introduced on December 1 to protect vulnerable people from irresponsible lenders create an ‘artificial credit crunch’, preventing young buyers from getting the loans they needed to access at the real estate level.

The borrowers’ experiences echo those of Bayliss in the credit crunch the country suffered as a result of the Global Financial Crisis (GFC) a decade ago, which left a scar on its financial life that has never never healed.

As banks cut lending in GFC, Bayliss was denied a loan that would have allowed him to buy his first house in Porirua. The reason for the drop was an unpaid four-year library fine of $ 17.50 recorded on his credit report.

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Reserve Bank Governor Adrian Orr expressed concern in August about the situation recent homebuyers might find themselves in, and since then prices have risen rather than fallen.

The fine was a mistake, as he had returned the books, and it was later erased from his record, but the black mark against him was enough to end his dream of owning a home.

“It was a chance to take that first step up the property ladder. Even then, it wasn’t cheap, but nowhere was it as expensive as it is today,” said Bayliss said.

He has since observed that house prices have become out of reach.

“There is a two bedroom duplex right next to us that just sold for $ 720,000,” he said.

There was good equity in the house he and his wife were trying to buy a decade ago, and, he said: a better position. “

It wasn’t even a big loan, only $ 249,000, easily available to the campus director of the adult education institution and his teaching wife.

A friend in the banking industry told him at the time that the bank was more interested in making larger loans, and Bayliss thinks he may have missed that reason, as the black mark on his credit report was no longer just an excuse for the bank.

Bayliss believed his experience reminded him of the impact that banks’ mortgage decisions can have on the lives of individuals.

Mortgage broker John Bolton is campaigning for home loans to be excluded from new lending laws.


Mortgage broker John Bolton is campaigning for home loans to be excluded from new lending laws.

“It is this position of power that they find themselves in,” he said.

“The real estate market has just gotten further and further away,” Bayliss said.

In the past three years alone, he said, the family had paid around $ 100,000 in rent.

Mortgage broker John Bolton has garnered support from fellow brokers and aspiring first-time buyers to get home loans excluded from tough new loan laws, which require lenders to gather more evidence than people can afford the loans they ask for.

Bolton said the changes in the law had prompted banks to become “ultra-conservative” in their lending decisions, restricting families’ access to loans.

Although loan volume figures confirming brokers’ fears the laws have created an artificial credit crunch have yet to be released by banks or credit bureaus, brokers backing Bolton have shared stories on the obstacles that borrowers now face in obtaining loans.

Karen Tatterson, Auckland Mortgage Consultant for Loan Market, gave the example of a woman she is trying to help get an extension loan to add an apartment to her house for her adult daughter.

The woman’s elderly parents had been too scared to go to the supermarket in recent months, Tatterson said.

The woman had therefore done their shopping for them and they reimbursed her after each store.

But, Tatterson said, “The bank allocated all the groceries to her, but not the credits.”

As a result, he declined the loan, claiming his expenses were too high, she said.

“The stories going around the industry make people shake their heads,” Tatterson said.

Auckland-based mortgage advisor Karen Tatterson is among brokers who fear the new lending laws have created an artificial credit crunch.

Peter Meecham / Stuff

Auckland-based mortgage advisor Karen Tatterson is among brokers who fear the new lending laws have created an artificial credit crunch.

Linda Eagleton, another loan market broker, said Christmas spending became an issue for a loan application she was managing.

The bank had looked at the couple’s last three months of spending to calculate their average monthly spending, but it did, including Christmas spending.

“We detailed which transactions were Christmas transactions. We said you shouldn’t divide those transactions by three as they are not quarterly expenses. They are annual expenses. The bank disagreed. “she said.

As a result, borrowers were not offered a loan large enough to purchase the home they wanted.

Banks scrutinized people’s budgets in such fine detail that people who wanted to borrow had to see brokers at least four months before applying for a loan for advice on how to modify their spending to better suit loan processes. demand from the banks, Eagleton said.

Waikato mortgage broker Lincoln Davie of Quantum Finance compared the sudden contraction in bank lending criteria to the impact of GFC.

“I really don’t think the government has made it through these changes. It’s going to create an artificial credit crunch,” he said.

“We are not in danger of running out of money. The banks have more money than they know what to do with. This is an artificial credit crunch caused by policy changes,” he said. he declares.

The impact would not only be first-time home buyers, but people wishing to relocate or borrow money to start a business, or invest in an existing business.