CCCFA July Regulation Changes

You may have heard whispers of recent CCCFA updates in finance news, so we thought we’d give you a quick summary of the key changes:

For our readers who are new on the topic; CCCFA stands for the Credit Contracts Consumer Finance Act. It is a piece of legislation passed by the Government to protect vulnerable borrowers, however historically it has seen ALL borrowers be affected in some way, shape or form. This has led to the topic being a large discussion point in the finance world, with the Government putting forward draft proposed changes to the regulations earlier this year, in April.

These changes now have been finalised, having officially come into force as of the 7th of July 2022.

Here’s a quick summary of what’s changed:

1. Lenders are no longer required to capture your ‘savings’ or ‘investments’ as an expense. Whilst originally considered as ‘necessary’ expenses, they are now removed from the list and classified as ‘optional’ expenses. 
2. Certain expenses can be excluded. Lenders can now be more discretionary when it comes to detailing their expenses which are more likely to cease once the home loan has been taken out. To put this into perspective: if you’re a frequent spender when it comes to takeaways, your lender or mortgage adviser may provide a commentary around this that advises the lender that this expense will stop once you have taken out your home loan. 
3. ‘Reasonable surplus’ reduction. The regulations previously required borrowers to hold a ‘reasonable surplus’ after their expenses were deducted from their income. This was considered a grey area given there was no real guidance on what that surplus should be. The change sees that so long as the lender can apply a required ‘buffer’ of funds to cover any miscalculations or deficits to income or expenses, then an application for reasonable surplus is void.
4. Examples provided for clarity of the definition of ‘obviousness’ exemption. Previously the regulations stated that when it was ‘obvious’ a borrower could securely make their repayments, without suffering hardship, they were able to be exempted from providing detailed income and expense estimates & information. The new changes see this second grey area of the definition of ‘obvious’ better clarified by providing detailed examples and scenarios. The updated changes state that credit scores and repayment history will not be a decisive factor to whether a borrower can ‘obviously’ afford the repayments.

How do these changes affect me?

Understanding these changes is important if you’re looking at buying a property, and how it affects people, will differ, depending on their personal and financial circumstances. You can however, be rest assured that there’s no drastic changes that impact negatively or significantly differently from what was previously in place. If anything, it is positive that there is more clarity towards some of those ‘grey areas’, detailed above.

If you applied for a home loan at the start of the year and were unfortunate in your application, now is the time to dust it off and have another look. All the changes detailed above are beneficial to you. Even if your situation has not changed the circumstances have, which is awesome for you.  If you are confused about where to start to reapply give us a call, we are more than happy to help. Just because you started your journey directly with your bank does not mean that a mortgage adviser cannot help you.

If you’re left with questions, or simply want to sit down and chat to us about what this might mean for your personal circumstances, reach out and get in touch.

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.