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LVR rules tweaked

Banks will have to check where a home loan deposit has come from under new rules being proposed by the Reserve Bank - but will not have to worry about a customer’s credit card debt.

Sunday, December 29th 2013, 9:03PM 1 Comment

by Susan Edmunds

It has released another consultation paper on the loan-to-value (LVR) restrictions, explaining the terms of its exemption for new builds and clarifying that – in most cases – customers’ non-mortgage debt will not be counted in the LVR of their mortgage.

Since October, banks have had to keep their new lending to borrowers with deposits of less than 20% to no more than 10% of their loan books.

The Reserve Bank wants customers to operate within the spirit of the rules and not get around them by using personal loans or other products to produce a 20% deposit.

There had been concerns that would drive it to instruct banks to assess customers on their total borrowing, rather than just the home loan portion. Banks said that could prompt customers to take their credit card business elsewhere.

But the Reserve Bank says including credit card debt in LVR calculations is not its preference at present.

It says it would prefer to introduce a deposit identification and verification requirement, prohibiting banks from lending to borrowers when it knows their deposit is funded by unsecured lending.

It said this would allow banks to continue to offer products to mortgage customers without them being counted in a customer’s LVR, so they are not disadvantaged relative to other banks in competing for that customer’s business.

NZ Home Loans chief executive Mark Collins said that would be a relief to the banks.  “That’s one of their big cross-sell products. But it won’t affect the broker market at all because where they put their credit card is irrelevant to what a broker does. But for banks, it was a biggie for them.”

He said it seemed significant that the Reserve Bank was taking a more liberal approach to the restrictions already. “They were quite bolshy early on, saying they wouldn’t change anything until they saw a difference but we’ve already seen two changes. Either they’re bowing to pressure or they’re already seeing a change.”

Westpac’s head of retail, Ian Blair, said the Reserve Bank’s statement aligned with the approach the bank was already taking.

The Reserve Bank also wants to add another item to the potential avoidance measures, to stop customers leaning too heavily on non-mortgage consumer debt to avoid topping up their home loans.

It has warned that if the feedback in consultation is that the proposed anti-avoidance clause and data collection are unworkable, it will look again at including non-mortgage debt in a customer’s LVR calculations.

« Confidence may prompt OCR hikeHigh-LVR lending slows »

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Comments from our readers

On 6 January 2014 at 1:10 pm Simon Rule said:
"It has warned that if the feedback in consultation is that the proposed anti-avoidance clause and data collection are unworkable, it will look again at including non-mortgage debt in a customer’s LVR calculations."

I really do despair at the current thinking coming out of the Reserve Bank.

Potentially including non-mortgage debt in a customer’s LVR calculations is about as draconian as a central bank can get. Where is this all going to end Mr Wheeler? You might as well simply limit borrowers now to a minimum 30% deposit for all new mortgages approved. It would be the same outcome essentially. And what's it all going to accomplish in the end to effect rising Auckland house prices? Absolutely sweet nothing! This appears to be nothing but an academic exercise in futility that will not benefit New Zealand or our potential new home owners.

Is it really going to take a potential change of Government before someone in the current administration wakes up to how out of touch the Reserve Bank is with the issues facing Auckland? Treasury have woken up to Auckland's problems. Why has the penny not dropped yet at the Reserve Bank?

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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