Britain's Prince William (L) picks up the "rakau tapu" as a man dressed as a Maori warrior looks on during a traditional Maori Powhiri Ceremonial Welcome at Government House in Wellington April 7, 2014 in this handout provided by Woolf Crown Cop
IN PHOTO: Britain's Prince William (L) picks up the "rakau tapu" as a man dressed as a Maori warrior looks on during a traditional Maori Powhiri Ceremonial Welcome at Government House in Wellington April 7, 2014 in this handout provided by Woolf Crown Copyright. The Prince and his wife Catherine, Duchess of Cambridge, are undertaking a 19-day official visit to New Zealand and Australia with their son George. Reuters/Woolf Crown

A study has stated that there is an element of racial bias in New Zealand’s mortgage lending process with obvious discrimination against applicants having "Maori looks.” The findings of the study by a team assisted by Auckland University, noted that the chances of a Maori person having a rating of 5 on a scale of 7, losing out on a mortgage application is high, because of Maori-like personal appearance as compared to a European-looking Maori with rating of just one on the qualifying scale.

It said the effect of personal appearance on home ownership is equally strong as income. "We were absolutely stunned," said psychologist Dr Chris Sibley, who was heading the NZ Attitudes and Values Study. The report’s co-author Dr Carla Houkamau, also said the findings are "shocking" as mortgages are not to be based on how people look. NZ Attitudes & Values Survey started its work in 2009 by analysing 6500 people from the electoral rolls. It tracks changes in New Zealanders' personalities, attitudes and values and is funded by a Marsden grant and Auckland University.

Systematic Bias

The paper, published in the US-based open access journal, “Plos One”, said, "What our analyses are picking up on is a statistical signal that is most likely to have been produced by a systematic bias in lending by banking institutions over a fairly long period of time.” Mike Pero, the founder of New Zealand's biggest mortgage broking company and son, a Cook Islands Maori, said: “That would be a fair comment.” Eric Crampton of the NZ Initiative think-tank said there could be other explanations beyond racial bias.

However, Mortgage brokers Bruce Patten in Auckland and Karen Essex-Mooney in Blenheim rejected the allegation and said they had never seen a mortgage application being turned away because of borrowers’ looks and noted that many borrowers are now applying online and may not even meet the lenders. New Zealand Bankers' Association chief executive Kirk Hope said racial stereotyping was not in the interests of banks' or their customers as mortgage is a highly competitive segment in the banking sector.

Curbs Backfiring

Meanwhile, criticism is out that introduction of loan-to-value ratio mortgage restrictions are backfiring with increase in foreign speculation and shutting out of first home buyers in the regions.

The concern was raised by Labour Party’s finance spokesperson Grant Robertson who released documents supporting his argument. The LVR restrictions were introduced by the Reserve Bank in 2013. The documents showed the Treasury telling NZRB that original LVR policy was more supportive for increased investor activity.

Robertson asserted that LVR restrictions negatively affected the regions. "It was very much a shot across the bow from the Treasury to the Reserve Bank - saying to them that they believe that there are consequences from the LVRs that not only will encourage property speculators, but also put pressure on people in the regions who want to try and buy their first home."

(For feedback/comments, contact the writer at k.kumar@ibtimes.com.au)

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