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CCCFA bad law but huge growth in credit is the bigger picture

Financial advisers have been told the Credit Contracts and Consumer Finance Act (CCCFA) is bad law but it is not the main issue on the table right now.

Thursday, January 27th 2022, 10:58AM 1 Comment

by Eric Frykberg

The bigger question was a gigantic splurge in mortgage lending over the last two years.

The comments came from the independent economist Cameron Bagrie, in a webinar organised by Financial Advice New Zealand.

He said in the last 12 months, total home lending had increased by $33 billion, or $2.5 billion per month. This was a lot higher than average, and way ahead of the growth in household income.

“An 11% rise in housing debt in 12 months is not normal, it is not sustainable. Income growth has been about 6%. Now that makes absolutely no economic sense to me.

“We can talk about the CCCFA and its unintended consequences etc etc etc, but somebody has got to step in and think about the bigger picture here.

“The environment we have been in for the past two years has been completely abnormal.”

Bagrie told his audience that 60% of all lending is housing based, it was 59% three years ago and 52%, 25 years ago.

“Now look, we are not going to get wealthier selling more expensive houses to each other.

“When you are starting to see housing credit growth at around 11% per year and you are seeing business lending pretty anaemic, then that is not a good sign.”

But Bagrie believes there are indications that this “unsustainable” growth in lending will not in fact be sustained.

This was partly due to actions by the Reserve Bank to raise the cost of borrowing. Also having an impact would be an increase in the supply of homes, with houses being consented at a faster rate than population growth.

“The CCCFA is just another twist of the knife.”

« CCCFA enquiry might have terms of reference afterallMike Pero CEO leaves industry »

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Comments from our readers

On 28 January 2022 at 4:07 pm Andy the adviser said:
No surprises there when the Government and the Reserve Bank have been handing out fistfuls of cash.

Banks have been dancing with glee at their new found wealth. And by increasing the lending rates well ahead of the RBNZ rises, they are creaming it. Lots of new income without having to work for it.

A perfect storm, you might say. Most of us could see it happening.

Apparently Covid makes some people blind.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - 4.19 - -
The Co-operative Bank - Owner Occ 5.45 4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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