Lighter LVR Restrictions Makes Things Easier for KiwiBuild Buyers

First home buyers in New Zealand have had a difficult time finding appropriate loans for the last few years. That is set to change, following a new policy where banks are able to lend 20 per cent of new loans to owner-occupiers. The loans only require a deposit of less than the same percentage.

The change in regulation is a good thing for those whose incomes are still less than able to accommodate the already-watered down loans. Individuals and families whose incomes are big enough to ‘service’ a mortgage, but not big enough for a deposit up front, will have an easier time securing a loan. For them, the process of buying a house is more accessible with the new, lowered requirements.

Previously, the policies have only allowed a 15 per cent loan to these same people. The change was meant to make things easier for them - moving the rate up to 20 per cent for all loans gives people extra room to re-assess their finances and formulate a cash flow to paying their mortgage loans.

Only recently, mortgage credit and house price inflation have eased up, allowing the adjustments to be made. LVR restrictions have also loosened in banks, and these restrictions may even continue to do so, following further assessments of the banks’ lending standards.

These renewed lending restrictions were welcomed by most bank officials. They are confident that the loosening of lending restrictions will make conditions better for first home buyers as they enter the property market. Investors will have fewer reasons to exit the market as well, ensuring that the supply doesn’t run out.

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