Sign JB's petition. The Government has made changes to responsible lending laws to protect vulnerable borrowers, but they have used a sledge hammer instead of a scalpel. This is an example of over reach, and will cause far greater harm to Kiwi homeowners and small businesses than it will protect vulnerable borrowers.
Working with development and commercial property funding, price is often an obstacle that I come up against. Many people have little understanding of how risk-based pricing works, and it can come as a bit of a shock when pricing is uncovered.
When it comes to property, the risk is that borrowers (and speculators in particular) think tomorrow will be better than today and don’t act. Watching a speculator in action is like putting a frog in water and gradually increasing the temperature. The frog never jumps out.
The Hayne Report was released in Australia recently, and brought about some stern recommendations for the lending sector. The standards have been put in place for the best interests of New Zealanders, however, like anything that is done by the government, they can often carry unforeseen circumstances. Let's take a look at how property investors could be affected.
Consumers typically don’t pay off their credit cards each month. With a $15,000 balance and an average rate of 21%, it costs $3,000 a year in interest ($250 per month in interest alone.) But most people don’t see that because it is a revolving debt that goes up and down.