10 February 2016
Man working ‘too many hours’ gets mortgage declined
A recent example where the bank declined a mortgage application from an Auckland man who works 60 hours a week shows
that the banks are also taking lifestyle factors into consideration under the new ‘Responsible Lending’ regime.
Auckland mortgage Auckland mortgage broker and principal of integrated financial services provider LoanPlan, Christine Lockie, said the man’s fulltime job as a plastics extrusion operator requires that he works shifts totalling 60 hours a week.
“He has worked this job for the last 18 months and makes good money – including from such things as shift allowances –
but the bank declined his application because, among other factors, they regard his workload as unsustainable. This is
becoming a typical example of how closely banks are looking at things.
“To be honest, I don’t think it’s a bad thing that the banks are making calls on what is right for the customer – it is
as it should be, but they are certainly much stricter than in the past. I think the marked drop in mortgagee sales may
be one result of their tougher stance. On the other hand, it could also be as a result of lower interest rates,” Ms
Lockie said.
Essentially it boils down to the banks, which get their information from a variety of sources including the mortgage
applicant’s payslip, making a call on lifestyle choices as well. Their opinion in this case was that he cannot
physically sustain the pace, which may affect his income long term. There is also always the risk of his hours being
reduced to 40 hours a week, for example.
“Health has always been a factor for the banks when assessing the ability of a person to repay their mortgage, but the
almost ‘predictive’ nature of this particular application – and there will certainly be others – makes it different.
“What it means is that the banks want to lend money to people who can demonstrate a strong sense of balance, in the way
that they manage their money, their spending and their health – simply being able to afford a mortgage at this moment
isn’t enough anymore. The banks are now looking ahead and assessing your ability to repay the mortgage over the long
term.
“Historically low interest rates are making it easier for people to get into the housing market, but getting in is easy
compared to staying the course long term, through the ups and downs, which may include rising interest rates and even
health issues,” Ms Lockie said.
She added that this does not mean that the man is locked out of the housing marketing because of his lifestyle.
“He does have other options available to him, including short term non-bank finance options that while they may be a bit
more expensive than the banks, aren’t particularly onerous at the moment.
“Accepting reasonable non-bank finance over the short term is a perfectly legitimate strategy for those who are
comfortable with the repayments, because it enables them to prove themselves to the banks. After a certain period, banks
will then be more likely to take over the mortgage,” she said.
ends