A financial advisor says the Government's newly announced regulation changes for home loans and lending will allow banks to use common sense.
As part of a National-ACT coalition agreement, the Government said it would update the Credit Contracts and Consumer Finance Act (CCCFA). It will revoke 11 pages of "overly prescriptive" affordability regulations.
The Government said the affordability regulations, introduced by the previous Labour Government, substantially increased the time it took to process a home loan and thousands of Kiwi families, who would have previously qualified, were locked out of the market.
Appearing on AM on Monday, Mainland financial advisor and director Kylie Connor said the changes will be "really significant" and open up a lot of doors for people on the fringe of qualifying for a loan beforehand.
"There's going to be a lot more common sense able to be applied to a lending application which will make a huge difference to a lot of Kiwis looking to get on or up the property ladder, or even make changes to their existing lending," Connor told co-host Melissa Chan-Green.
After Sunday's announcement, Labour's spokesperson for commerce and consumer affairs, Arena Williams, warned the announcement would mean less protection from loan sharks.
One of the reasons the CCCFA was introduced was to cut out loan sharks, however, Connor said it probably didn't have that impact.
"If anything, because the banks and larger finance companies were more scrutinised and more heavily regulated, good people who could have gone into them and got lending with them now couldn't. So, probably, we would have seen more people ending up going to those types of loan sharks," she said.
For example, Connor said she had clients paying $750 in rent and a mortgage would have cost them $700 but they were being declined for affordability.
"There was no common sense. There was no ability for the banks to use their own discretion when it came to someone's affordability of a loan and that's what we're really excited to see changed."
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