Among those tweaks, the government is scrapping 11 pages “of overly prescriptive affordability regulations” that accompany the Act.

In January, when he announced that the government would make reforming the CCCFA a priority, commerce and consumer affairs minister Andrew Bayly said that processing times for lending applications had increased by about 50% across all loan types and that banks estimated they were having to turn down between 6% and 7% of applicants who would previously have qualified for a mortgage.

In announcing the changes earlier this week, Bayly said that the affordability regulations “threw a bucket of cold ice over banks and financial providers” because of their overly prescriptiveness.

“The overly arduous checks meant the time it took to process loans dramatically increased. Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours,” he said.

Last month, accounting firm KPMG surveyed 27 banks and found they were well advanced in implementing the required processes and were worried about the potential costs involved if the existing legislation were to be scrapped.

New Zealand Banking Association chief executive Roger Beaumont said the changes “should help fix the one-size-fits-all approach that treated all types of lending and borrowers the same.

“The change still means that consumers are protected and lenders need to be responsible.”

But the changes will allow banks to be more flexible and able to use their discretion, particularly in emergency situations, Beaumont said.

“We look forward to working with officials on responsible lending code guidance to get the balance right and help ensure we don't see a prescriptive approach reintroduced.”

The Finance and Mortgage Advisers Association of New Zealand (FAMNZ) also welcomed the changes.

FAMNZ managing director Peter White said it had never made sense to have a standard benchmark for household expenditure because every individual and family is different.

And lenders already have their own assessment criteria and “it's clearly not in their financial interests to lend money to someone who can't afford it,” White said.

The regulations being scrapped had imposed unrealistic criteria on lenders.
“The government shouldn't be in the business of telling citizens how much pizza they should consume.”