The CCCFA: What Property Buyers Need to Know After the 2024 Reforms

The Credit Contracts and Consumer Finance Act (CCCFA) underwent significant changes in July 2024. Here is what property buyers need to know about the current lending environment.

A Brief History

When the CCCFA's stricter lending rules took effect on December 1, 2021, they created major obstacles for property buyers. Banks were required to conduct exhaustive assessments of borrowers' living expenses, often using statistical benchmarks that exceeded actual household spending. Stories emerged of mortgage applications being declined because applicants had subscriptions to streaming services or spent too much on takeaways.

The rules were designed to protect vulnerable consumers from predatory lending, but they had unintended consequences in the mortgage market. First home buyers and property investors alike found it significantly harder to get approved.

The March 2023 Relaxations

Recognising the problems, the government introduced initial relaxations in March 2023. These changes clarified that lenders did not need to inquire into every expense category and gave banks more discretion about how they assessed ongoing expenses versus one-off purchases. While these changes provided some relief, many in the industry felt they did not go far enough to address the underlying issues.

The July 2024 Reforms

In April 2024, Commerce and Consumer Affairs Minister Andrew Bayly announced the government would revoke 11 pages of prescriptive affordability regulations. These changes came into effect on 31 July 2024.

The key changes include:

• •Removal of prescriptive expense categories: Banks no longer need to assess specific spending categories like entertainment or dining out in granular detail
• •More lender discretion: Banks can now use their judgement about whether discretionary expenses would realistically continue at the same level
• •Reduced compliance burden: The removal of overly detailed requirements has streamlined the application process

What Still Applies

The reforms did not remove all lending requirements. Lenders must still:

• •Make reasonable inquiries about your income and expenses
• •Ensure you can afford the loan without substantial hardship
• •Follow responsible lending principles
• •Verify your income through payslips, tax returns, or bank statements

The core principle remains: lenders need to be satisfied you can afford the mortgage. The difference is they now have more flexibility in how they assess this.

What This Means for Borrowers

The lending environment is now more pragmatic than it was during 2022-2023. A good mortgage adviser can explain to the bank that certain expenses-like subscriptions or one-off purchases-would naturally reduce once mortgage payments begin.

That said, demonstrating strong financial discipline still helps your application. Reducing unnecessary spending in the months before applying, paying down consumer debt, and showing consistent savings behaviour all strengthen your position.

Ongoing Regulatory Changes

The Financial Markets Authority (FMA) is taking over regulatory responsibility for consumer lending from the Commerce Commission. Further reforms are progressing through Parliament, including removal of personal liability provisions for directors that had prompted overly conservative lending practices.

The Bottom Line

If you were declined for a mortgage during the stricter CCCFA period of 2022-2023, the lending environment has changed significantly. It is worth reassessing your position with a mortgage adviser who can guide you through the current requirements.