Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's new reforms to lending laws

One expert has claimed there are upsides and downsides to the Government's changes to finance laws.

From today, the Government is dropping prescriptive affordability regulations from the Credit Contracts and Consumer Finance Act.

NZ Herald Wellington business editor explains whether these changes will make it easier on Kiwis looking to buy their first home.

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Episode Transcript

Speaker 1 (00:00):
From today. The strict loan affordability regulations are gone or
certainly changed from the Credit Contracts and Consumer Finance Act,
henceforth known as the Triple CFA, which is a lot
more catchy. And this ends the bizarre inquisitions that the
banks used to make into your personal life before they
denied you alone. Here's the big question that I've got
for our Wellington Business editor, Jeanne tim Trady. Hello, Jenney,

(00:23):
Hey Andrew. This is going to make getting money easier.

Speaker 2 (00:27):
I don't think it's going to make a really big
difference in the current environment unfortunately, but the positive is
it should be quicker to get a loan. So basically
Commerson Consumer Affairs Minister Andrew Bailey has taken an ax
to the Triple CFA. He's basically put a red pen
through eleven pages of regulations. These are the ones that

(00:50):
require lenders to be really prescriptive about the checks they
do and whether you can or can't afford to take
out a loan, so a mort googe or another type
of loan for a car or for some shopping you
need to do with something like that. So instead of
requiring lenders to check your bank statements with a fine
tooth comb to see if you can afford the loan.

(01:12):
Now lenders can use their own discretion, so they can
take different approaches for different customers. It's really putting the
onus on the lender to decide how best to assess affordability.
The issue, Andrew, is, at the moment interest rates are
really high, and that is the thing that's preventing people
from getting loans. So you know, whether you buy too

(01:33):
much takeaways or whatever isn't as much of an issue
as the pure fact that the interest rates are just
really high. The thing that will help is if these
processes that the lenders have to follow are a bit
more simple, that should speed up the loan application process.

Speaker 1 (01:48):
I was talking earlier to such a Lockley who's from
the social lender money sweet Spot, and I said that
the rules were drawn up to stop loan sharks in
the first place, but the problem with them, the unexpected
consequence was it also stopped banks from issuing smaller loans
in particular, which ironically drove people back to loan sharks again.
So now my question will be, now, with all those

(02:09):
regulations gone, will the loan sharks be back in business?

Speaker 2 (02:13):
Well, that is such a good question, Andrew, And I
mean I don't know the answer to that. That the
tinkering that's happened with this piece of legislation has been extensive.
So the previous government relaxed the rules in May twenty
twenty three in July twenty twenty two after changes made
in December twenty twenty one were deemed to be too

(02:36):
heavy handed and too problematic. So it's yet to be
seen whether Andrew Bailey has struck the right balance here.
I mean, it is really difficult when so many different
types of lending are captured by one piece of legislation.
You know, it's very different if you're trying to get
a five hundred thousand dollars mortgage versus if you're trying

(02:57):
to get one thousand dollars for groceries, if you know
what I mean.

Speaker 1 (03:01):
I absolutely know what you mean. But also today, I
mean it was like it was like right after a budget.
You know, this was the day. It was like match
thirty first really so many changes, loans to value ratio
went as well, and everybody say, this is all a
great day for first home buyers. And I decided I
came up with the idea that maybe we're still in
the dark tunnel, but we're a third of the way
through and we can see the light right now, and
it's about time we started getting our mojo back. What

(03:23):
do you reckon?

Speaker 2 (03:24):
Well, I'd love love it if we got our mojo back.
I mean, you know, some of these rules are really
there to protect us from ourselves, you know, in terms
of the loan to value ratios are another one. You know,
it is important that people don't take out more debt
than they can realistically service. So I think with the
triple CFA changes, he said LVR rules, the Reserve Bank

(03:46):
is loosening them only a little bit, so they're not
as heavy handed in terms of the size of the
deposit that you need when you borrow money. But then
they are introducing a new rule which is requiring you
to have a certain amount of income compared to the
debt that you want to take out. That's those debt
to income rules that have been debated now for many years.

(04:06):
So there's quite a cocktail of things happening in the background.
The thing that I think everyone is looking out for
is interest rates and interest rate cuts and whether the
first o CR cut will in fact be in coming months.

Speaker 1 (04:20):
Yes, but at the same time, today we hear about
inflation in Australia and we're expecting interest rate rises over
there to the four percent level, so you know, you know, boy,
it is a big milanch. Hey, Jiney, I thank you
so very very much for your time today, Jenne Tebrishaney
Tim Triny, who is our well in to business editor.

Speaker 2 (04:39):
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