A couple has recalled how their bank rejected their application for a mortgage extension because of a pre-Christmas shopping trip to Kmart.
Kim Anderson-Robb and her husband from Dunedin on New Zealand‘s South Island are among those already stung by amendments to the Credit Contracts and Consumer Finance Act, which came into effect on December 3.
Aimed at protecting vulnerable borrowers from loan sharks, banks now place higher scrutiny on applicants’ spending habits before loans are approved.
Ms Anderson-Robb recently applied for an $80,000 (A$75,000) mortgage extension to help fund urgent repairs and renovations, including a rotting back deck and rewiring of the home after asbestos was found in the fuse box.
But her bank of 17 years declined the loan because of a recent one-off $187 trip to Kmart, another $100 shopping spree to buy Christmas presents at a discount variety chain The Warehouse and use of a credit card she hadn’t used in over a year.
Kim Anderson-Robb was recently rejected for a mortgage extension by her bank due to amendments to New Zealand’s lending laws
Ms Anderson-Robb claimed she was told by the bank staff they don’t qualify for a mortgage top-up because the couple ‘overspend’.
Her husband’s daily purchase of a drink from the dairy while at work was also questioned.
‘We’ve had a mortgage for 17 years, never missed a payment, never asked for a mortgage holiday so I’d say we are a pretty good customer,’ a frustrated Ms Anderson-Robb told the Otago Daily Times.
‘We are on good money but they declined our application because of a one-off trip to buy Christmas presents and a bloody drink. It’s stupid.’
The support worker added she previously had mortgage top-ups approved by the bank ‘with no issues whatever.’
The couple have since decided to save for the urgent repairs needed for their home.
Kim Anderson-Robb and her husband were rejected for a mortgage top-up following a $187 shopping spree at Kmart Invercargill (pictured)
Ms Anderson-Robb feels sorry for potential homebuyers who may now struggle to to enter the property market due to the recent changes to the lending laws.
‘It’s just so bloody tough and I really, really feel for them,’ she said.
Auckland couple Jason and Cindy Guild also had their house-buying dreams shattered by the amended rules.
Their pre-approval for a loan was cancelled in December, just days before they were to bid at an auction.
The couple were just short of a having 20 per cent deposit, but they were debt-free, had no children and both had high-paying jobs.
‘We thought this government was trying to put us into houses, but it seems like it’s not,’ Mr Guild told Stuff.
‘It went for $20,000 under what I was going to pay for it.’
Many Kiwi potential homebuyers are now struggling to enter the property market as a result of changes to lending laws which came into effect December 3 (stock image)
New figures from Centrix released on Friday show the proportion of home loan applications that are approved have dropped from 36 per cent to 30 per cent in the last month.
Financial Advice New Zealand has requested an urgent meeting with the government to address industry concerns about recent changes to the Credit Contracts and Consumer Finance Act
Chief Executive Katrina Shank says mortgage advisers are seeing a significant reduction in pre-approvals not being renewed and lending levels to all borrowers being cut due to the new requirements.
‘Some of the stories almost defy logic, like being refused a loan or having the amount cut drastically because you’re spending too much on coffees and takeaways,’ Ms Shank said in a statement.
‘For many Kiwis all this means that they can no longer obtain a mortgage at the same amount of credit as previously would have been approved.
‘We believe the intention of this legislation was not to reduce the availability of credit for the average Kiwi who was not vulnerable and could afford a mortgage previously.
Financial Advice New Zealand has requested an urgent meeting with the government to address concerns about the law changes (pictured apartments in Auckland)