Reserve Bank to Ease LVR Restrictions from 1 January 2018

The Reserve Bank has decided to ease the lending restrictions on home buyers and property investors from the start of the New Year. LVRs were introduced in 2013 as a temporary measure to cool the housing market, but many first home buyers have since found it much more difficult to hop onto the property ladder.

Now the clouds are clearing. On the 29th of November, the central bank released a statement that officially stated their decision to increase the cap on banks from 10% to 15% for new mortgage lending to owner occupiers as of 1 January 2018. For first home buyers, this means that for the first time in 5 years, they are in a better position to buy a house.

At present, no more than 10% of loans can go to owner occupiers with a deposit of less than 20%, and only 5% of lending is to investors with a deposit of less than 40%. With the new restrictions, this will increase to allow those with deposits of less than 35% for no more than 5% of investor lending.

Governor Grant Spencer from the Reserve Bank said the loan to value ratios had been in place since 2013 to address financial stability risks arising from rapid house price inflation and increasing household debt. “These policies have helped improve banking system resilience by substantially reducing the share of high-LVR loans.”

He added that in the past six months, pressure on the housing market had continued to moderate due to further tightening of LVRs, a firming of bank lending and an increase in mortgage rates. “Housing market policies announced by the Government are also expected to have a dampening effect on the housing market… A cautious approach will reduce the risk of resurgence in the housing market or deterioration in lending standards."

Spencer said that in light of those developments the Reserve Bank was undertaking a modest easing of the restrictions, and the bank will monitor the impact of the changes and only make further adjustments if financial stability risks remain contained. For real estate agents in Auckland and the rest of New Zealand, this means a busy year ahead, with first home buyers looking to buy property at a better position to do so. To look at houses for sale on the North Shore, visit Team MZ.