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LVR restrictions could come off this year

Reserve Bank deputy governor, Grant Spencer says the LVR restrictions are working and the earliest they will come off are later this year.

Friday, May 9th 2014, 8:46AM

Pressures in the New Zealand housing market are easing gradually but risks remain, the Deputy Governor of the Reserve Bank, Grant Spencer, said in a speech today.

“The volume of house sales has dropped considerably across the country, other than in Canterbury, and the slowdown in volume has also been reflected in prices.  Without the Loan to Value Ratio restrictions (LVRs), introduced in October 2013, annual house price inflation might be running some 2.5% higher,” Spencer said.

Housing supply conditions have also started to improve, with a recovery evident in residential construction. In Auckland, progress is being made in freeing up the supply of buildable land and improving the consenting process. In Canterbury, the replacement of severely damaged homes is well in train after a slow start.

However, the housing shortage remains large and significant increases in building are required in Auckland and Canterbury over the next three years.

“There are many parts to the housing market equation – and many risks. Probably the major risk at present is the outlook for net immigration, in part due to reduced departures of New Zealand citizens. We are forecasting net immigration to reduce gradually as economic conditions improve in Australia,” Spencer said.

“We’ve started raising the Official Cash Rate, with the aim of forestalling general inflation pressures in the broader economy.  Floating mortgage rates could be 7 to 8% in two years’ time, closer to their average of the past 20 years.”

“The extent and timing of interest rate increases will depend on a number of uncertain variables, in particular the exchange rate and housing market pressures,” Spencer said.

We believe that LVRs are achieving their purpose. The financial system is less vulnerable to an adverse housing shock and banks are now less exposed to potential credit losses as the interest rate cycle turns upwards.

We’ve stated that the LVRs are temporary, but before removing them we want to be confident that the housing market is responding to interest rate increases; and that immigration pressures are not causing a resurgence of house price pressures.  It will take some time to gain this assurance.  At this stage we consider the earliest date for beginning to remove LVRs is likely to be late in the year.

READ THE FULL SPEECH (with graphs and tables) HERE

« Parents 'propping up lending'Update on the New Zealand housing market [FEATURE with GRAPHS] »

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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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