Personal finance challenges endure

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As the National Party forms a coalition and New Zealand prepares for a new government, mortgage adviser Claire Williamson believes the incoming government will have a task ahead of them in tackling the country’s current issues in the property and personal finance sectors.

Based in Cambridge, Williamson speaks with her clients about the ups and downs of property, lending, and personal finance on a daily basis, and offers valuable a perspective on the changes that are needed in the industry.

“It’s important that we acknowledge the positive, and the first home loan is working well. Since the changes made to first home loans in 2022, the increase in first home buyers being able to use the first home grant has been huge,” she says. “Pre-approval is possible, it helps the process go smoothly, and we have plenty of options in terms of lender, rates, and structure. It’s a big tick from me on this front!”

But Williamson says there are some challenges too, including having existing personal debt. She says banks are always tougher on approving loans for new borrowers when they have consumer debt in place, for example, car loans, credit cards, Afterpay, or personal loans.

“I’d love to see the government reward first home buyers who actively save, spend their money wisely, and have no existing debt.

A simple credit check included in the application to Kainga Ora would verify this.

“It would be great to see these first home buyers provided with additional first home grant funds, similar to those building a new home, as it incentivises would-be borrowers to reduce their debt and become more attractive to a lender,” she explains.

For most middle-income households, Williamson says their single biggest cost is childcare for their under-fives. It worries her that it’s more expensive for working parents to return to work than it is to stay home – dependent on their income.

“It’s a big cost, with some families spending up to $20,000 per year on childcare, and they’re barely making ends meet. Supporting these families would go a long way to getting parents back to work – if they choose to, of course – which in turn supports businesses,” she says.

Williamson believes property investors have been somewhat of a scapegoat for the current government as interest deductibility was removed, the bright line test switched back to ten years, and rent freezes have been talked about.

“I think this approach is all wrong – the investor-tenant relationship is symbiotic, and it should be treated as such,” she explains.

“Each needs to support the other, and policymakers would do well to consider more carefully the impact of these rushed pieces of legislation. From my perspective, supporting the reversal of these policies is a win for tenants, who are currently paying higher rents and have less surety because some investors are being forced to sell property to pay tax on income they’ve already spent – on paying the bank. More are still selling existing properties in favour of new builds, which is more disruptive for tenants,” she adds.

Williamson says the changes in the Credit Contracts and Consumer Finance Act have been the most challenging piece of legislation to hit the financial services industry in years.

“Unfortunately, it hasn’t delivered any substantial changes to the problem it was trying to solve – protecting vulnerable borrowers. To achieve that outcome would mean administrating more compliance across smaller lenders, and that takes more resources and a united industry,” she says.

“What it has done is frustrated advisers and bank staff and add to an already high workload for little to no gain for borrowers. Although I gripe about it from time to time, believe it or not, banks actually have really good mechanisms in place for picking up vulnerable borrowers, and I think the Responsible Lending Code does a great job of that already.”

Williamson would also like to see the RBNZ limits for low LVR lending increase, and tip the balance further in favour of first home buyers. This may require a reduction in the limits for investment- based lending, but with many property investors moving to renovate their existing portfolio or purchase new builds, this wouldn’t disadvantage too many.

“Let’s allocate more funding for lower deposits it’s tough for first home buyers who are outside eligibility for the first home loan, so this would allow more of them to get into their own homes,” Williamson adds.

“Property and lending is a tough gig, and I’m sure no government will get it 100% right. But from someone out there in the trenches talking to those doing it tough to fulfil their goal of home ownership, I hope this advice is useful for our incoming leaders and can set in motion positive changes to future lending for Kiwis.”

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