Spending habit info - overly intrusive?

[Chris W]

I'm applying for refinancing funds, one application through a preferred lender and another as a backup.
One lender asked for the usual - proof of income, statements seeing the income deposited, mortgage/rates etc outgoings.

One lender balked upon seeing the bank statements and claimed that they weren't from my transactional account. Huh? Say I, of course they are. That's the account my income goes into. Then I pay off my credit card/transfer money out of it as needed.

So then, once they realise that I do all my spending on a credit card, they ask to see those statements.

Is it just me, or is this overly intrusive? No broker/lender has ever asked to see the minute details of my everyday spending before. Which shops I patronise, how often I eat takeaways, when I fill up my car etc. is surely my business? They'll be asking what time I go to bed and how often I shower, next.

From APRA lending guidelines to banks. Given that the large 4 NZ banks are owned by Australian banks, it is possible that they have implemented these policies in their subsidiaries. The banks were criticised by APRA for using standardised cost of living indices.

Excerpt from speech from APRA

One significant factor behind differences in serviceability assessments, particularly for owner occupiers, was how ADIs measured the borrower’s living expenses (Chart 2a and 2b). As a regulator, it is hard to understand the rationale for large differences in what should be a relatively objective, and extremely critical, metric.⁴






Of major concern were a few ADIs who opted to make their credit assessment based on a lower level of living expenses than that declared by the borrower. That is obviously a practice that should not continue, and ADIs should be making reasonable inquiries about a borrower’s living expenses. In fact, best practice (and intuition) would be to apply minimum living expense assumptions that increase with borrower incomes; this was a practice adopted by only a minority of ADIs in our survey.""

[Wellington Broker]

Given that the large 4 NZ banks are owned by Australian banks, it is possible that they have implemented these policies in their subsidiaries.

This exactly. Have heard it straight from Execs at ASB and from the largest broker group in NZ. This is why they changed valuation policies as well. Excitingly they think there will be more regulation to come!

[Chris W]

This exactly. Have heard it straight from Execs at ASB and from the largest broker group in NZ. This is why they changed valuation policies as well. Excitingly they think there will be more regulation to come!

Wellington Broker,
thank you for your confirmation of this.

I suspect that this is also the reason for the debt servicing calculation changes which seem to have made it more difficult to get financing in NZ for real estate. Heard some low LVR borrowers getting turned down for loans as they didn't have sufficient income to meet debt service payments criteria (7% on P&I).

APRA issued revised lending guidelines in October 2016 for consultation (which happened to coincide with the LVR tightening rules in NZ by RBNZ) and they were finalised in Feb 2017. I suspect that the banks were implementing the guidelines before they were finalised in Feb 2017.

[Nick G]

It's silly because they can reduce their servicing risk by approving a loan only for P&I, happened with a client just last week.