It is barely a year ago that lenders were competing to attract borrowers with blemished credit histories, small deposits or unproven incomes. But the credit crunch has dramatically reduced choice as lenders have withdrawn, retrenched and tightened criteria.
Mortgage broker Darren Pratley, of Auckland Home Loans and chairman of the New Zealand Mortgage Brokers Association says that lenders’ criteria have changed so much that some borrowers will have no option but to stay with their current lenders when they need to refinance.
Any missed payments could certainly jeopardise a borrower’s ability to move. “Lenders aren’t prepared to take on another lender’s problems.”
Louise Ledger, director of non-bank lender Global Home Loans confirms that “the appetite for anyone with a credit issue has really shrunk”.
Laura Gregory, general manager of Freedom Mortgages (formerly Resi Mortgage Corporation) says it is “definitely a lot harder than it was six months ago” for borrowers to switch lenders if they had experienced payment problems.
William Cairns of non-bank lender General Finance says that many who easily qualified for a mortgage two years ago, would not get one today.
If a borrower gets a loan approval and it is not quite what he or she wanted they may have to accept it, as it is likely to be the only one they get.
For lenders who remain in the higher-risk end of the market, the conditions may help them to retain borrowers who might otherwise have jumped ship if they had a choice of rate or terms. But this is likely to be small comfort when overall demand for loans is down and where one of the main funders of loans for non-banks, GE, has withdrawn all fixed rates. Borrowers with strong credit ratings may be able to switch to mainstream banks if they want a fixed rate.
