A draft version of the proposed changes to the CCCFA rules has been released by the Ministry of Business Innovation and Employment (MBIE), which – if approved – would be likely to allow borrower-ready consumers to access credit more easily.
The review is ongoing, but if the changes are implemented, it would be potentially good news for many first-home buyers who, in recent months, found themselves turned down on mortgages that they would normally be approved for. Here’s what the Government reversal on CCCFA may mean for buyers.
A recap of what the CCCFA rules are
The new rules in the Credit Contracts and Consumer Finance Act (CCCFA) came into effect on 1 December 2021, to encourage more responsible lending. In short, the changes required lenders to follow a more robust and granular process when ensuring proposed lending was affordable and suitable for borrowers.
However, the new rules had some unintended consequences, including many quality first-home buyers and other borrowers being turned down. So, after consulting with consumers and lenders, the Minister decided to make some practical adjustments.
The proposed changes in a snapshot
The proposed changes released by the MBIE on 6 April include:
- Lenders would no longer need to inquire into current living expenses from recent bank transactions;
- Savings and investments would no longer be examples of outgoings that lenders need to inquire into;
- The requirement to obtain ‘sufficient detail’ would only refer to information provided by borrowers directly, rather than through bank transaction records;
- The rules would also provide lenders with alternative guidance and examples for when it’s ‘obvious’ that a loan is affordable and suitable for borrowers.
If the proposed changes were approved, they would come into force on 3 June and they would allow lenders to take a more pragmatic approach, hopefully bringing more opportunities for buyers. We’ll keep a close eye on how the situation evolves.
Need help? Get in touch
If you’re looking at buying your first home, now can be a good time to review your position with a mortgage adviser like us, and use the next few months to see what you can get across. With rules changing quickly and mortgage rates still on the rise, it’s all about finding the most appropriate approach for your circumstances. Get in touch: we can help you understand your options.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.