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Busy on mortgage front

Gisborne mortgage advisers say they have been busier than ever since the first lockdown of the Covid-19 pandemic.

Mike Pero Gisborne franchise owner and mortgage adviser Kirsten Morris said when the pandemic started experts had predicted that the market would crash, but the opposite happened and the market had been booming since.

Ms Morris had started her franchise business in February 2020, five to six weeks before the first lockdown.

“I was still quite new and setting everything up, building a client base.

“It was a bit stressful not knowing how the pandemic would impact on my business.

“When we moved down to Alert Level 3, we had a lot of inquiries.

“There has been a lot of interest from people wanting to buy a house, and one of the reasons could be the high rent prices.

“There's a lot of work.”

Enough work for Ms Morris to bring on board two more mortgage advisers to help with the growing inquiries.

While the demand remained high, getting a home loan had just become a little trickier for prospective homebuyers, she said.

The new law around lending money in New Zealand comes from an update in December last year to the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

The changes had imposed stricter duties on all lenders, including banks, around how they make inquiries and verify information to ensure lending to consumers is likely to be suitable and affordable.

The new law required all lenders to capture and check specific information about a customer's income and expenses before granting them credit — personal loans, home loans, home loan top-ups, credit cards, overdrafts, and increased credit limits.

Ms Morris said the new stricter rules had “definitely” impacted her clients.

“Before these changes you could put an application to amend mitigating past risks and negotiate with the lender that the spending behaviour would change once the home loan was approved.

“For example, a bachelor living with his mother, goes out drinking every weekend and buys takeaways each day. We could say once they get their house they'll be cooking dinner at home and not going out drinking so much.

“This doesn't work any more. The lenders need to see the improved spending behaviour before they grant you a loan. At least three months of bank statements.

“Now more than ever it's important for people to see a mortgage broker first. We are working with a lot of people months in advance to put spending plans in place with them, make sure their statements look tidy, if they have a history of unplanned overdrafts, direct debits bouncing, we make sure we sit with them and stop it from occurring again.

“Main banks won't look at you if you had any of those account blips — even if it's something like forgetting to transfer money from one account to another.”

Ms Morris said the change was good in the way that it helped people manage their finances early on.

“It's about making sure people aren't put in a position where they will end up in trouble. As tricky as it is, it has a bit of positive side to it as well.”

Gisborne Financial Services business manager and mortgage adviser Shelley Mullooly said the pandemic had made them “busier”.

“The CCCFA hasn't had much impact on us, the biggest impact has been Covid-19.”

However, “the increasing prices of houses in Gisborne has influenced first-home buyers because with the new CCCFA, banks are requiring 20 percent deposit.

“For first-home buyers, it is about having a plan. They need to see a broker as a starting point.

“The price increase has slowed down a bit but I am waiting to see how people will react with the interest rates increasing.”

Mrs Mullooly said their biggest concern at present was people being under-insured for their houses due to the increasing price of materials.

“If a house burns down, the owner needs to replace the house . . . because the costs of the materials have increased considerably due to the pandemic, what the owner might have insured their house for may not be the correct amount now.

“That's why we want our community to be aware of it, or contact us.”

MANY NOW UNDER-INSURED: Gisborne FInancial Services business manager Shelley Mullooly says the mortgage side of their business has been busy during the pandemic, and their biggest concern now is existing home owners being under-insured due to the increasing price of materials.Picture by Paul Rickard