The first full month with Credit Contracts and Consumer Finance Act (CCCFA) changes in play saw a 44% year-on-year decline in new retail credit account openings, data from credit bureau Equifax New Zealand shows.
“January was the first full month of account opening data since the new affordability assessment criteria was introduced through the CCCFA changes in December 2021.
Unsecured credit, including credit cards and personal loans, took the biggest hit, declining by 52% year on year (y-y).
"A drop of this magnitude represents a significant decline in credit activity be it for new credit, refinancing or consumers just trying to get a better deal on their finance," said Angus Luffman, managing director at Equifax.
The data, which compares this January with January 2021, and represents the biggest decline since Covid-19 first reached our shores in March 2020, covers new account openings or lines of retail credit on which the credit has been activated.
Amendments to the Credit Contracts and Consumer Finance Act which took affect from December, saw borrowers discretionary spending more highly scrutinised, a rise in declined applications and tough penalties for lenders not playing by the rules.
Home loan account openings declined by 35% and within the unsecured category, new credit cards were down 71% and new personal loans declined by 33%, something that had a direct lifestyle impact.
"Unsecured credit helps Kiwi consumers purchase everyday items like furniture and electronics, to make their lives better. In January we saw that borrowing activity decline significantly,” said Luffman.
21 Comments
They could also be bad news for wealthy property investors looking to offload for massive capital gains, who can only receive a price that the market can bear based on FHB real incomes.
the idea that price drops are a bad thing for FHBs is just so insultingly stupid, but it always pops up…
Exactly - if FHB can't afford to buy, then there is nobody for property investors to bid against when buying homes, pushing prices up.
If prices don't go up, property investors equity doesn't go up, which also reduces their ability to further influence the market buy purchasing further residential properties. Bidders across the market drops.
The removal of FHB from the market will be equally damaging to property investors as it ever would be for FHB themselves.
As has been mentioned before, what FHB should do is collectively get together and not bid on properties at all for the next 12-24 months. Don't buy any properties at all. A form of market manipulation. Is this illegal? Don't think many would care anymore if it resulted in buying a house for hundreds of thousands of dollars less in the future.
Investors appear to be more affected - January mortgage lending is down by ~50% for investors year-on-year versus ~20% down for FHBs.
Perhaps the reason for the drop is to help consumers pass the new CCCFA affordability assessment - reduce discretionary expenses (i.e credit cards and personal loans), and thereby increase the chances of being able to obtain finance for a house - especially if you are a FHB.
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