When circumstances change

In 2021 Wiremu and Marama wanted to sell their home, consolidate some debt, and buy a new home. At first, Wiremu and Marama wanted to borrow $280,000 but their home sold for less than they expected and the debt they needed to consolidate was a little bit more. In the end, Wiremu and Marama needed to borrow $360,000 to buy the new property.

At first, the $360,000 loan looked unaffordable but, with the help of a mortgage broker, Wiremu and Marama looked again at their Working for Families tax credits and the child support payment entitlement. With this additional income the lender calculated that, after monthly living costs of $4,020, for Wiremu, Marama, and their five children, and monthly loan repayments of $2,100, Wiremu and Marama would have a monthly surplus of $1,200. Even if the interest rate increased from 5.85%pa to 8.39%pa, the lender calculated a monthly surplus of $600.

The lender was satisfied the lending was affordable, approved the loan, and Wiremu and Marama signed the loan agreement. Almost immediately the loan fell into arrears. Wiremu and Marama spent the next two years struggling to repay the loan. They accessed KiwiSaver to pay some of the loan arrears and applied for hardship relief.

In mid-2023 the lender issued a Property Law Act notice, beginning the mortgagee sale process, and Wiremu and Marama said they would sell the property themselves. A couple of months later Wiremu and Marama sold the property for less than they hoped, but enough that they could repay the loan.

Wiremu was deeply disappointed at the way events had unfolded. They had lost their home and were now renting, unsure if they would be able to afford to buy another home. Wiremu complained to the lender that they should not have loaned to them in the first place and had not done enough to help when things went wrong.

The lender was confident its affordability assessment supported its decision to lend and said Wiremu and Marama did not meet the hardship criteria. Wiremu did not accept the lender’s response and complained to FSCL.


Wiremu was sure there must have been a problem with the affordability assessment. When things went wrong the lender’s only suggestion was to submit a hardship application, but when they did the lender declined the application. Wiremu felt there must have been something more the lender could have done.

Wiremu also complained that they did not know the amount of the loan repayments until they were in their lawyer’s office to sign the loan agreement. Wiremu said that when he saw the loan repayment amount, he knew they would struggle to repay the loan.

Finally, Wiremu said that when the loan came off the one-year fixed interest rate period. the floating rate was higher and the lender refused to re-fix the loan at a lower fixed interest rate, meaning it was even more difficult for them to make the loan payments.


We reviewed the lender’s file and could see that Wiremu and Marama had missed payments as soon as the loan was drawn down. This can indicate a mistake in the lender’s loan affordability assessment.

However, when we reviewed the information presented to the lender, both the income and expenses calculations were supported by credible information. Based on the information available, we were satisfied that the lender had properly assessed affordability and we could not see any breach of the Credit Contracts and Consumer Finance Act 2003.

We went through the affordability calculations with Wiremu, then asked what happened after they borrowed the money. Wiremu said that the child support payments unexpectedly reduced substantially, meaning they could not afford to repay the loan. Wiremu agreed that neither he nor the lender could have known at the time they borrowed the money that this was going to happen.

We also explained that, from the diary notes, it appeared that the lender was trying to help, but the loan was structured over a 30-year term and so there was no room to restructure the loan and reduce the payments. While selling the house was not something anyone wanted, it seemed to us that the lender had been reasonable in giving Wiremu and Marama a couple of months to sell the property themselves.

Although Wiremu’s recollection was that he discovered the loan payment amount in the lawyer’s office, the lender gave us a letter of offer disclosing the payment amounts dated a couple of days before Wiremu and Marama met the lawyer.

Finally, we explained that while it seemed unfair that the lender would not allow Wiremu and Marama to re-fix the loan term at a lower interest rate to reduce the payment amounts, Wiremu and Marama had been struggling to pay those reduced amounts for quite some time. We suggested that if they had been able to enter another fixed term loan, and the lender took mortgagee sale action before the fixed term ended, Wiremu and Marama may have had to pay an early repayment cost.


Wiremu said losing their home just felt so unfair but was satisfied with our explanation and agreed to withdraw his complaint. We closed our file.

Insights for consumers

Sometimes circumstances change, and what was an affordable loan is no longer affordable. While lenders are obliged to consider hardship applications to see if there is anything that can be done to allow the borrower to repay the loan, the reality is that sometimes the only option is to sell the property securing the loan. We know selling your home is a last resort, but, when faced with a mortgagee sale, selling the property yourself gives you some control over how your relationship with the lender ends and the price you may achieve for the property.