@jc said in Bank Lending/CCCFA:
@godder said in Bank Lending/CCCFA:
https://www.stuff.co.nz/business/127657685/ir-reports-sharp-drop-in-first-home-withdrawals-from-kiwisaver
This seems relevant, and is put squarely on the change to reduce 80% LVR exemptions as part of the banks' loan portfolios from 20% to 10%.
Mortgage advisers and property experts say the dip is not the result of changes to the Credit Contract and Consumer Finance Act (CCCFA), which have seen the proportion of home loan applications that are approved fall.
Instead, they blame Reserve Bank Te PÅ«tea Matuaā limits on how many low-deposit loans banks are allowed to make.
Obviously not the whole story, but no doubt it's some.
It's not an either/or thing. As you will know better than most, the legal framework that the government controls dictates what the RBNZ sets as banking regulations and operational parameters for themselves and the financial institutions. Then there are other, overlapping legal frameworks that dictate directly what the financial institutions are able / obliged to do. The financial institutions set in place processes and mechanisms that they use to make sure they comply with those laws that directly govern them as well as the operational directives from the RBNZ.
The CCCFA amendment didn't change any of the directives from the RBNZ, but it did set in place new expectations for how the banks executed their internal procedures. Effectively this means that the RBNZ says things like reduce your exposure to non-80% LVR loans to 10%. The process of bringing their loan book into compliance is subject to the new terms in the CCCFA amendment. If they look at a loan they are obliged to check for affordability.
And the directive to reduce the exemptions doesn't ban them, it just limits them: it is still within a bank's discretion to issue an 85%, 90% or even 100% LVR loan if the circumstances are right. But if they are having to do affordability checks on someone with a 20% or bigger deposit (which they are), imagine the due diligence they have to do on someone who only has a 10% deposit. Looking at it from their POV, if they can be deemed reckless by offering a $400k loan on a $500k property, there would need to be near certainty of affordability before they offered a $850k loan on a $1m property.
I also find it ironic that QE and the Support For Lending specifically put large volumes of cash onto banks' balance sheets. If they weren't supposed to be lending it out what on earth did the government and RBNZ think they were going to do with it? And why didn't they spread it more widely? As "picking winners" goes this is even worse than the lockdown windfalls for supermarkets IMO.
Absolutely fair, especially that last point about Funding for Lending, should have closed that months ago (and I did say that the article was not the whole story of the reduction in lending). One of the exemptions to the 80% LVR is new builds, so those aren't counted, but I assume they also don't make up a large portion of mortgages. Reducing from 20% to 10% of the loan book as high LVR mortgages obviously doesn't prevent that lending, but if a bank was already at or above 10%, does put an immediate stop to further lending above 80% LVR (other than new builds) until the bank gets down to the 10% limit.
Edit: https://stats.govt.nz/information-releases/property-transfer-statistics-december-2021-quarter
This also shows quite a reduction in actual property transfers of homes.
There were 41,460 property transfers involving a home in the December 2021 quarter (down 19 percent from the December 2020 quarter)