Borrowing has changed – but not as much as you might think


There’s been a lot of talk about updates to the borrowing rules. While these are currently being considered, the laws that came into effect in December last year are still in place. Since then, you’ve probably heard some personal stories that no doubt reflect what’s happening on the edges of lending. Despite all that, we’re still helping people buy, renovate, and invest.

So, what do lenders need to look at when it comes to loan applications, and what’s it designed to achieve?

Put simply, the recent changes focus on:

  • Suitability – we need to take a close look at what you want to achieve with the money you’d like to borrow, and a suitable way to do that whether that’s through a home loan, credit card, personal loan, or overdraft. To do this we now have to collect more information and ask more questions.
  • Affordability – we also need to look closely at whether you’ll have a reasonable amount left over after making your loan repayments so you don’t get into financial difficulty. When it comes to home loans we do this by checking your expenses to make sure you can comfortably cover things like day-to-day spending, rates and insurance, savings, one-off or unexpected expenses, and any interest rate rises.

The requirements have been there for a while, but there are now more specific rules about how we assess these things. After all, it’s in no one’s interests for someone to get a home loan that doesn’t suit their needs or they can’t afford.

In particular, we need to look more closely at discretionary expenses – what you spend money on once you’ve covered the basics of home loan payments or rent, food, travel costs and other major items. We’re looking at things like entertainment, subscriptions or memberships, and other regular payments.

It’s quite prescriptive and it can feel like we’re asking too many questions, but that’s because it needs to be – it’s designed to protect New Zealanders from getting into financial difficulty.

We’re still helping people achieve their home ownership dreams

The good news is there’s still plenty of opportunity to buy or renovate – you just need to keep in mind the new requirements, and that things are taking a bit longer because there’s now more involved in the home loan application process.

When you’re ready to borrow, it helps if you’ve done your homework, have everything already prepared, and come to your lending appointment with information showing:

  • your income
  • bank statements from the last three months
  • other financial commitments like car loans or credit cards
  • your ID
  • proof of deposit
  • details of the property you have in mind, if you have this.

The BNZ website has more information about exactly what you should bring.

You can still do many of the things you love

There are no rules about where you shop or what streaming service you use – lenders are looking for unusual or concerning spending, or regular spending habits that might tip you over the edge.

What I say to people is live like you already have the home loan you want to apply for, be realistic about the lifestyle you want to live once you’ve got it, and make changes now to reflect that lifestyle.

If you think there are parts of your budget you can cut or savings you can make before applying, it’s a great idea to do it, but don’t go too far. We know drastic and unrealistic cuts to your budget won’t last forever so we take into account what someone in similar circumstances to you would spend overall as a reasonable minimum, which gives us a better longer-term view of your ability to pay off what you borrow.

We want you to be able to manage your home loan and live a life you can enjoy.

Can I borrow as much?

If you’re looking at borrowing up to the maximum you can afford, you may find the new rules mean you’re not able to borrow as much. There are also bank policies about how much mortgage debt you have as a proportion of how much you earn.

At the end of the day it’s for good reason. We need to make sure you can realistically afford to pay back the money you borrow without getting into financial difficulty, with all the anxiety, stress, and uncertainty that may bring.

But if you’ve got a good deposit, are spending less than you earn with a reasonable amount left over each month (and, of course, meet all our lending criteria), we’re still here to help you buy that house, do up your kitchen or grab hold of that investment property.

After all, that’s what it’s all about.


This article is solely for information purposes and is not intended to be advice with respect to any matter discussed in it. If you need help, please contact BNZ or your professional adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.

All home loans are subject to our lending criteria (including minimum equity requirements), terms and fees (including an establishment fee of up to $150).