Changes to the C.C.C.F.A – yes that’s right there are changes being made. These changes are only proposed and if they move forward will not start until June. In saying this it’s a move in the right direction.
A quick recap – CCCFA – the Credit Contracts Consumer Finance Act – was a piece of legislation passed by the Government to protect vulnerable borrowers, but the legislation had a big impact on ALL borrowers and now the Government proposing changes.
What are the new changes?
Currently, when working within the confines of the CCCFA, Banks are having to look at peoples saving and investments as expenses, the changes would mean that these two outgoings are no longer classed as such and therefore would not count to an overall spending total. To most of us working in the industry is an absolute blessing. You will remember the news articles that told us all that people were being declined loans because of their spending at Kmart. The new proposed changes are going to shake up space. The government’s proposal is to allow lenders and advisors not to have to check current everyday spending when assessing future spending. This proposal will have the biggest impact on your everyday borrower. This means that no longer will lenders and advisors be asked to trawl through your everyday banking statements and ask you thousands of questions about your everyday spending. Lenders and advisors will be able to use more of their personal discretion to talk to the fact that once the loan is drawn down your everyday spending will accommodate for the repayments and your spending habits will most likely change to accommodate this.
How will the proposed changes affect me?
Until the changes are in effect there will be no change and it’s always good to be a bit conservative around how long the proposed changes will take before they come into play. Until the changes are made, you will need to still be conservative around spending (for more information on this read our blog post here). Even once the changes come into effect and your spending is no longer raked over the coals it is still good practice to curb your spending in the 3 months leading up to applying for a home loan. Curbing your spending can make you even more attractive to banks.
What can I do to make the most of the proposed changes?
You can start looking at your spending, you can create a budget and cut back on spending or start spending cash by getting out cash with groceries or petrol. But if you have a budget and have a handle on your spending when the changes come into effect you will be in a much better position to be able to borrow money from the bank.
Will these changes affect interest rates?
Here at Mortgage Sure, we do not have a crystal ball – we don’t know how or what will affect changes in interest rates and there are many factors that affect interest rates. We can only hope that the proposed changes allow for more lending to take place.
References:
https://www.rnz.co.nz/news/business/463133/cccfa-lending-rule-changes-sector-cautiously-optimistic
While we’re home loan experts, our blog posts are for general information purposes only and are not intended as financial advice. If at any stage you need personalised advice, get in touch on 06 8788 4444 or Ben or Mark.
