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Mortgage borrowers disconcerted by bank scrutiny

Be prepared to have every aspect of your financial life scrutinised if you want a mortgage approval in 2019, a New Zealand mortgage advisory firm is warning.

CEO of LoanPlan, Christine Lockie, said the eligibility for getting a mortgage even a year ago has shifted considerably as lenders continue to tighten their criteria for lending.

"I'm not saying it's a bad thing, but certainly the level of documentation required to get a loan has risen considerably. The banks will examine every detail of your financial life and they'll ask questions – as brokers we're finding, for example, there is a lot more emphasis on existing account conduct and even one glitch may affect your chances for a loan approval.

"If you had a credit issue in your affairs two or three years ago but have paid it off in full, you may still very well be declined by the mainstream banks. Another shift is where commissioned earnings and bonuses are now more heavily discounted than they have been in the past.”
Lockie said the banks will still lend if the borrower can show clear bank conduct, a clear credit history and a clear ability to service the debt according to their bank calculation models.

"It's the grey areas that are a problem. Previously banks may have exercised discretion in say, for example, the odd occasion your bank account was overdrawn. But the Royal Commission in Australia and our own upgraded Responsible Lending Code makes it more difficult for the banks.”

On top of that, much of the banks processes now involve auto-decisioning. This means a computer is making the decision and of course machines can’t think outside the square.
"It now takes a lot longer to get a loan approval. Clients are disconcerted by the fact that they have to provide such extraordinary levels of detail. As advisors we're working hard to educate clients on the fact that they're going to have to jump through a lot more hoops to get their loan."

Lockie maintains the bank scrutiny is not a bad thing. People often tend to think that they are more financially responsible than they actually are.

"Nobody's perfect, but keeping your finances squeaky clean has never been more important."

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