Affordability not always a level playing field

Murney, who spent a decade with the BNZ and has been an adviser for 12 years as well as being a property investor, says contractors, the self-employed and those on casual income get extra scrutiny when applying for a mortgage.

Outlining her views to a Bayleys Old vs New Property webinar, she says, “It often means these people have fewer choices on where they can obtain a mortgage.”

It doesn’t stop there, Murney says. “A bank can ask a borrower, for instance, to reduce their contributions to KiwiSaver if they are paying more than 3% into their retirement fund in order to meet the bank’s servicing requirements. That's something I find really annoying, asking people to reduce their savings to meet banks’ stress test rates.”

Banks’ stress test rates are normally about 2% higher than carded rates, so at the moment it is about 8.95%. “It is not just existing loans being worked out on this test rate but also new loans which are subject to bank ‘shading’. This is where a bank works out a percentage of a borrower’s income to use in their servicing calculation and makes a decision on how much they can afford to borrow.”