Are non-bank lenders able to fill the mortgage gap?
Non-bank lenders are reporting an increase in mortgage applications following the new lending rules, but such applications are not guaranteed to be successful, said Lyn McMorran, executive director of the Financial Services Federation.
Changes to the Credit Agreements and Consumer Credit Act (CCCFA), which came into force on December 1, require lenders, including banks, to screen borrowers much more rigorously than in the past .
Since then, many people have reported being denied a mortgage due to minor transgressions, such as spending too much money on their dog. Others have had pre-approvals revoked.
The changed lending environment was highlighted in the latest survey of mortgage advisers by independent economist Tony Alexander. In January, 83% of respondents said banks had reduced their willingness to lend.
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McMorran said this has led borrowers to seek alternatives to major banks.
Federation members were getting more inquiries from mortgage advisers who were taking a scattershot approach and going to every lender they could think of to get a request over the line, she said. .
“They get good quality applications from people who would normally have been approved by the banks.
“But the question is whether they can fit them into their criteria and meet the requirements.”
Non-bank lenders have traditionally been more flexible and accommodating, but that did not mean applications rejected by banks would be approved, she said.
“They are subject to the same requirements as banks and have the same problems with the prescriptive and uniform approach of the legislation. Bank or non-bank, we are all in the same boat.
Non-bank lenders offering home loans, Resimac, Avanti Finance and Pepper Money all reported an increase in inquiries but said it was too early to be definitive on what that meant.
But Resimac chief executive Luke Jackson said while his priority was to comply with the new rules, he would ‘not be interested in how many cafes’ home loan seekers have a strong service footing. debt.
It had a new, faster pre-approval option for customers introduced by a broker who met the criteria that bypassed reviewing bank statements by using benchmarking to assess their spending.
This benchmarking model allowed him to avoid unnecessary hurdles and provide loans in a climate where it was becoming increasingly difficult to buy a home, he said.
“New Zealanders are very loyal to banks, but they now face increased regulation and need providers who think differently. We see ourselves as an alternative, and with rates comparable to banks.
Jackson said Resimac has the ability to handle an increase in demand without impacting turnaround times.
This was also true for Pepper Money, said the lender’s national sales manager, Michelle Sargeant. It was nimble and in growth mode, and eager to keep up with increasing applications.
“Our processes allow us to work with customers without being too picky about the costs of takeaway coffees etc.
Pepper Money offered loans that did not put borrowers in financial hardship, Sargeant said.
“We won’t change on that, and that ticks most of the boxes of the new rules.”
Traditionally, higher credit costs from non-bank lenders have deterred borrowers, but with many lenders the gap has narrowed in recent years.
Resimac’s standard prime mortgage rates online ranged from 4.96% to 5.96% for a two-year fixed rate, depending on the size of the deposit.
Pepper Money’s two-year fixed rates are its floating rates plus 1.20%. Its variable rates range from 3.44% to 5.65%, depending on credit history and size of deposit.