Isbister Partners New Zealand

CCCFA – The Current State of Play

CCCFA – The Current State of Play

On the radio this morning I heard that a report issued by AIA NZ shows one fifth of Financial Advisers are seeking or have sought medical help for stress in the last few months, and a quarter are looking to exit the industry.  It made me think about how our team is going and about how clients are feeling.  In the report it suggested that a reason for the burn out was around increased regulatory requirements
There has been much talk in the media around CCCFA, new lending laws that kicked off on December 1st 2021, and the challenges involved with getting lending approved right now.  The law came in to protect vulnerable borrowers.  There have been unintended consequences of this law, making it harder for borrowers to get loans.
The new legislation is being reviewed by MBIE, however, until this happens, we need to still try to help our clients to buy homes.
We are seeing application fatigue from our clients.  It can be very disheartening when the questioning becomes intrusive and seemingly endless.  We have seen clients give up or become frustrated with the level of detail and documentation that needs to be provided.
It is rarely a seamless process – lenders and advisers are getting used to the new requirements, and different interpretations of the new act make this challenging
There’s a lot more paperwork and forms to complete.
One of the keys to surviving the loan application process is to accept that it’s going to be tough.  If you have bought before this time it will be different.
However, with a bit of patience, hard work and paperwork, we are getting loans approved, and clients moving into homes.  Other clients have chosen to wait 3 months, live a little more frugally, and make sure payments are made on time.
We’d also like to bust a myth.  You will have read or heard of stories about people being declined due to Netflix or drinking too much coffee.  What we are seeing is very different to that.  Netflix and coffee get focused on as these are expenses that can be cut easily.  We’re seeing lending being declined for consistent overall expenditure.  For example, spending alot takeaways a month on top of spending alot on groceries per month.  You can cut Netflix, but it is the takeaways you need to focus on.

Now, hear from Tony Alexander, independent Economist:
Housing markets move in cycles. That is a line I have started a number of my articles with this past year as a way of setting the scene for what is happening now. First, I used the sentence to highlight the housing endgame underway from the June quarter of last year. What I mean by that is a period of growing dominance of restraining factors.

These factors include a credit crunch, higher interest rates, rising new build supply, anti-investor tax changes, and net migration outflows. They now are wholly dominant as is clear from the monthly data from REINZ. Average NZ house prices fell by 1.1% in December and then by another 1.5% in January.

The boom has ended and now my starting sentence acquires a new importance. When a boom turns to decline some people ignore the fundamentals and grasp at straws. That for the moment will include a belief that the special residency visa for 165,000 migrants will produce surging demand, changes to CCCFA will see the credit crunch end, and returning Kiwis will snap up houses.

All three factors are positives. But they won’t outweigh the negatives of interest rates rising all this year through into 2023, booming new build supply, a brain drain of Kiwis offshore, and the collapse already underway of FOMO – fear of missing out.

But that just brings me to the next step in the turning of the cycle after the clutched straws are released – excessive pessimism. This might come mid-year once the Reserve Bank issues some stern warnings about inflation, prices for houses fall a bit further, and discussion of the brain drain surges.

The price-collapse pundits who have been wrong for the over four decades will once again emerge from the woodwork. Some people will get scared and make bad decisions. That is why for all this year I’ll be emphasising supporting factors such as the very strong jobs market and rising building costs as much as the restraining factors.

For owner occupiers the environment is shifting to one of reduced risks of selling then not being able to buy again. For investors the range of properties to choose from will increase, the emphasis on yield will re-establish itself amongst the newbies, and some acquisition bargains for properties including development land will appear come 2023.

For first home buyers financing costs will go higher. But the range and number of listings including new builds will grow, and stress associated with property searching will fall to its lowest levels in a decade.

For additional information on the economy, housing market, and interest rates, you can subscribe to Tony’s free weekly Tony’s View publication at

Disclaimer:  This newsletter is meant to be informative and engaging, hopefully not a cure for insomnia.  Please don’t take this as personalised financial advice.  Discuss your situation with an Advisor.  This is where I need to say past returns are no guarantee of future returns.


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