Missing out on mortgage for working too hard

An Auckland mortgage broker highlights a client scenario that shows banks are taking lifestyle factors into consideration under the new ‘Responsible Lending’ regime.

A man has had his mortgage application declined for working ‘too many hours’, according to Auckland financial services provider LoanPlan.

The Auckland man’s fulltime job involves shift work as a plastics extrusion operator totalling 60 hours a week and indicates banks are not taking lifestyle factors lightly under the new ‘Responsible Lending’ regime.

Mortgage broker and principal of integrated financial services provider LoanPlan, Christine Lockie says the man brings in a good income on this job, which he has held for the past 18 months. 

“But the bank declined his application because, among other factors, they regard his workload as unsustainable,” says Lockie. 

“This is becoming a typical example of how closely banks are looking at things.

“To be honest, I don’t think it’s a bad thing that the banks are making calls on what is right for the customer – it is as it should be, but they are certainly much stricter than in the past. I think the marked drop in mortgagee sales may be one result of their tougher stance. On the other hand, it could also be as a result of lower interest rates.” 

Lockie says the bank was of the opinion that the man would be unable to physically sustain the pace, and could affect his income long term and the risk of his hours dropping to 40 hours a week.

“Health has always been a factor for the banks when assessing the ability of a person to repay their mortgage, but the almost ‘predictive’ nature of this particular application – and there will certainly be others – makes it different,” says Lockie.

“What it means is that the banks want to lend money to people who can demonstrate a strong sense of balance, in the way that they manage their money, their spending and their health – simply being able to afford a mortgage at this moment isn’t enough anymore. The banks are now looking ahead and assessing your ability to repay the mortgage over the long term.

“Historically low interest rates are making it easier for people to get into the housing market, but getting in is easy compared to staying the course long term, through the ups and downs, which may include rising interest rates and even health issues,” Lockie said.