Adviser shares tips in a tough lending environment
As mortgage borrowing applications continue to tumble, one adviser is tackling the issue head on.
Vega Mortgages financial adviser Alexander McAlpine (pictured above) said the banks have slightly eased their lending criteria since the height of the CCCFA changes in December last year.
“The banks are still examining and scrutinising expenses – however, not as bad as before. The biggest push-back now by the banks are for clients who have less than a 20% deposit,” McAlpine said. “With interest rates increasing, banks are stress-testing client’s affordability at a higher rate as borrowing amounts continue to drop.”
Read more: Loans, applications for mortgages take a dive
McAlpine said his clients were finding it harder to get pre-approvals as banks were increasing their stress-testing for clients.
“This is affecting clients who were approved before the latest interest rate rise at a higher amount with banks applying new policies and lending thresholds,” he said. “Banks might reassess affordability criteria and see if it is still relevant.”
McAlpine said his number-one tip for prospective clients was to have a minimum of three months of perfect account conduct.
“I tell my clients before they start house hunting to engage a broker first so we can help them tidy things up before applying for a mortgage. We make sure they are not exceeding their spending limits, removing buy-now-pay-later transactions, cancelling subscriptions, minimising eating out. I tell them to act as if your statements are being scrutinised before they actually are,” he said. “Economists are saying this will continue until 2023 and then rates should start reducing. However, no one has a crystal ball.”
Read more: Kiwis advised to spend wisely
McAlpine said as cost-of-living pressures increased and interest rates rose, clients were starting to feel the pinch.
“Let’s hope we can get inflation under control ASAP and then rates should drop,” he said. “Clients coming up for renewal who might not have realised how fast rates have jumped will be affected, but there are ways around there and advisers can help.”
McAlpine said mortgage advisers were the experts when it comes to the bank’s criteria and home lending.
“We know which banks are open for business and which are playing hardball. We advise our clients which banks are best suited to their goals and guide them through the whole lending process and beyond,” he said. “A lot of clients think banks are just different colours and if they get declined by one bank, that means all banks will have the same outcome. That is not the case, because we are here to help and can negotiate on the client’s behalf for interest rates and potentially get them a better deal because we know what other lenders are offering.”
