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New credit reporting rules to affect mortgage borrowers

New credit reporting rules coming into effect from April 1 next year could make it easier for some people to get mortgages but more difficult for others.

Thursday, October 6th 2011, 6:46AM 3 Comments

 

 

Privacy Commissioner Marie Shroff has signed off on the changes which mean lenders will have much greater information on people's credit history, including on whether they pay their bills on time rather than the current system which usually only provides information on defaults.

Assistant Commissioner Blair Stewart says it was "a big step for the commission to permit it" and for the commission to be convinced of the economic benefits to consumers.

"We've made sure it's a closed loop. Sure, you are sharing more sensitive financial information but it's only going to be unlocked when you seek credit," he says.

The information can't be accessed for any other purpose.

"Most people see the legitimacy of being open about how far you're extended financially" when seeking credit, Stewart says.

The new system could benefit those with no credit history, such as young people, recent immigrants or those who for whatever reason have had little contact with the mainstream banking system, he says.

"Those people may well have a good payment history with say, a telephone company or utility. Quite poor people can demonstrate they're actually good risks and they pay their bills on time and they shouldn't be pushed off onto loan sharks."

On the other hand, banks will gain a lot more information on people with previously undisclosed credit. In Hong Kong when similar rules were introduced several years ago, a number of banks discovered they had customers holding multiple credit cards and who were using one card to pay off another, Stewart says.

It's possible the new rules could promote competition. For example, existing banks tend to have a lot of information about long term customers which a new entrant has no access to currently. The new rules should mean a more level playing field for future new entrants, he says.

The new rules also give banks the ability to adopt a more refined version of risk-based pricing. "If you really are a good risk, you could end up paying less," Stewart says. That was the experience when similar rules were introduced in Singarpore but it may not happen here because of the small size of the New Zealand market.

"The system enables those things. That doesn't mean it will happen. We would hope there will be evidence of that when we come to review the code in three-and-a-half year's time."

 

« ANZ, ASB banks major mortgage market losers through GFCRegulatory loophole lets rogue financial operators to stay in business »

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Comments from our readers

On 6 October 2011 at 11:42 am Jeff Royle said:
This is a great move forward and brings NZ into line with most other countries. It also means that the Lenders can automate more of their systems so improving service and ultimately could lead to on-line approvals. Good move.
On 6 October 2011 at 12:16 pm alex said:
I am disappointed to note that the "privacy Commissioner" has naively signed off the opening up of information to Veda advantage and lenders.

The opening up of everybody's financial information to Veda Advantage (Baycorp) and other informational pariahs is a backward step and frankly opens up a breach to invade our personal privacy.

This impacts (read disrespects) upon those who pay there bills and who, therefore should expect personal privacy.

Veda Advantage and other credit reporting firms control information solely for the purpose of making themselves money.
They have no interest in people just the information.

Fair enough they should have information on late payers or defaulters but only that information. Therefore - if your credit check doesn’t show anything then conversely "you are a good bill payer" which is essentially what we have now.

Conversely if you allow the Credit Control coys to access and collate that information CHANGE THE RULES to make them provide people with their own information FREE - as quite often VEDA Advantage have got it wrong or fail to record payments.

I disagree with Commisioners argument that opening up the information will assist people to get loans - There is enough information available now for that with "defaulters and collection information sufficient.
On 6 October 2011 at 4:40 pm Claire Matthews said:
I agree with Jeff, that this is a positive move for consumers seeking credit. And the rules already require that Veda (or any other credit reporter) provide a free copy of their own report to an individual on an annual basis, and I would encourage all New Zealanders to regularly get a copy of their credit report.
Commenting is closed

 

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

Last updated: 21 February 2020 4:32pm

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