Student Debt Increasing Factor in Mortgage Refusal

Media Release

for immediate release - 19 September 2002

attn: Education, Economy, Community & Political Reporters

Student Debt Increasing Factor in Mortgage Refusals

Mark Baxter, OPSA Student Liaison Officer and co-author of the 1999 “Impact of Student Loans on Finance Raising Ability” (OUSA), today commented on the recently released “Student Loans Effect on Graduates’ Borrowing: A Survey of Bank Managers & Loans Officers” (NZUSA 18 Sept, 2002). The current study was of a similar methodology to Mr Baxter’s original and there is a robust correlation between the 1999 and 2002 results giving good validity.

The number of respondents who have clients with Student Loans is very similar (92% in ’99 and 95% in ’02). As the number of people with student debt enter the workforce this figure shows an expected small increase. The number of loan officers who had declined finance with student loan as a factor was also similar (47.2% in ’99 and 51% in ’02). Thought this increase is not largely significant a comment by a respondent loan officer is noteworthy - “As time goes on, more and more mortgages will be declined, as student loan debt will push the application outside the criteria”.

“Things have not got better, there have been no positive changes for people with student debt trying to seek finance over the last few years, this can only have negative impacts for society and the economy” said Mr Baxter.

However there is one significant change from the 1999 survey. While the number of respondents who rate Loans as ‘not important’ in refusals is similar (14.3% in ’99 and 16% in ’02), the extent Student Loans play in refusals has increased dramatically. The ’99 survey showed 85.7% of officers considered the extent Loans played in refusals was ‘moderate’. However the current survey shows now only 31% rate Loans as ‘moderately importantly’. Leaving over 50% with an increased importance of Loans in refusals - 31% considering them ‘important’, and 22% as ‘very important’ in finance refusals.

“Despite the last government being more student friendly the situation is in fact getting worse, the current government need to take a hard look student debt and tackle it head on“ said Mr Baxter.

Further Information (including copies of the ’99 and ’02 studies)

Mark Baxter tel/fax (03) 477-6974 PO Box 5381, Dunedin
Student Liaison Officer mob 021-1146-753 mbaxter@tekotago.ac.nz

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