The Government's announced it's unwinding regulations for home loans and lending that were put in place by the previous Government, with hopes it'll make it easier for people to get on the property ladder.
The announcement, which is part of a National-ACT coalition agreement, would update the Credit Contracts and Consumer Finance Act (CCCFA).
"Our Coalition Government is committed to rebuilding the economy and making life simpler by cutting red tape," Commerce and Consumer Affairs Minister Andrew Bayly said in a statement on Sunday.
"We are revoking 11 pages of overly prescriptive affordability regulations, introduced by the last Government, to enable Kiwis to access finance with confidence.
"These regulations created unnecessary compliance costs and are an excessive barrier for lending. And worse, the regulations failed to protect the most vulnerable Kiwis - the very people they were intended to safeguard."
The Government has also revealed a package of reforms it says will:
- Improve dispute resolution to better protect consumers
- Exempt councils from the CCCFA so they can offer low-risk financial products to help households improve their energy efficiency by installing heat pumps and insulation
- Remove duplicate reporting requirements
"When the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December 2021 it threw a bucket of cold ice over banks and financial providers by prescribing minimum steps to assess the affordability of a loan," Bayly said.
"The overly arduous checks meant the time it took to process loans dramatically increased. Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours.
"This meant it was no longer affordable for many providers to offer small loans."
In the joint statement, Housing Minister Chris Bishop added that the time it took to process a home loan increased substantially and thousands of Kiwi families, who would have previously qualified, were locked out of the market.
"The changes announced today will make the home loan application process simpler for hardworking Kiwis who have diligently saved to buy a house," he said.
"Home buyers have had it hard enough over the past six years under Labour, what with extraordinary house price inflation, interest rates that went through the roof causing untold pain, and these ridiculous CCCFA changes making it much harder to get a mortgage.
"Lenders are still required to treat all borrowers with the same amount of risk regardless of whether they want a $1000 overdraft or $1 million home loan," he said.
Bishop said the previous Government tried to amend the regulations but failed to address these "unintended, bad outcomes".
Bayly assured the changes would still require lenders to act responsibly and ensure lending will not cause hardship, but said lenders would not have to follow a "prescriptive, one-size-fits-all process".
"It became very difficult for everyday Kiwis, who need $500 to fix their broken-down car, to access a safe line of credit. They were effectively frozen out of the market and many vulnerable Kiwis were instead forced to borrow from high-interest loan sharks," he said.
The Government said this was the first phase of financial reforms, adding public consultation on a range of matters would be announced in the coming weeks.
"Kiwis must be able to access financial services safely without unnecessary hurdles. These reforms reinforce our Government's commitment to provide regulatory clarity, protect vulnerable consumers, and grow the economy," Bayly said.
Labour warns of loan sharks
However, Labour's spokesperson for commerce and consumer affairs, Arena Williams, warned the announcement would mean less protection from loan sharks.
"It's important that New Zealanders can access safe, responsible and affordable credit," she told Newshub.
"Kiwis can expect less protection from loan sharks and unaffordable debt as a result of today's announcement.
"Labour responded to feedback, especially from first-home buyers, that banks had gone too far. We made the initial set of changes to strike the right balance to ensure everyone can access credit effectively."
