Student Debt limits access to Mortgages

New research released today by the New Zealand University Students’ Association (NZUSA) shows that some banks are rejecting applications for mortgages based on the size of graduate’s student loan debt despite the Banking Ombudsman and the Government stating that the size of a loan debt should not be taken into account when seeking finance.

The nationwide survey of bank managers and loans officers found that student loans had been a factor for 51% of respondents when declining finance. Mortgages were the most likely form of finance to be declined.

“Graduates should disclose that they have a student loan but not the size of it,” said NZUSA Co-President Andrew Campbell. “Until banks ensure that their policy is in line with the Banking Ombudsman and only consider the ability of clients to make repayments, graduates will be less able to buy a house or start a business.”

“Student debt is clearly making it harder for graduates to access finance. Not only is it harder to save for a deposit on a house when 10% of your income over $15,000 is going on your debt, you could be hit again by banks who consider you a risk.”

“This survey backs up what has long been assumed; student loans make it harder to access finance. This survey is further evidence that the student loan scheme is making it more difficult for young New Zealanders to do the things that their parents took for granted – live and work in New Zealand, have children and buy a home. The trend of decreasing home ownership is likely to continue unless banks change how they deal with clients that have a student loan.”

“The government needs to reduce the cost of tertiary education by increasing access to student allowances and reduce fees if it wants to maintain the New Zealand way of life,” said Campbell.

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