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Looming LVRs impact on mortgage lending

New LVR restrictions seem to be affecting mortgage demand already, with the Reserve Bank’s latest residential lending data showing a big dip in mortgage lending

Wednesday, August 24th 2016, 4:43PM

by Miriam Bell

Driven by its concerns about the risk the housing market poses broader financial stability, the Reserve Bank announced it would be introducing a new round of LVR restrictions back in July.

The latest LVR restrictions are investor focused and require investors seeking new property loans nationwide to have 40% equity or deposit.

While the new LVR restrictions do not come into effect until October 1, the Reserve Bank said it expected banks to start acting “in the spirit of” the new LVRs immediately.

Banks responded to the Reserve Bank’s call accordingly and, since the announcement, they have only been approving new investor loans that fit the criteria.

Now, it appears that the new rules have had an impact on residential mortgage lending already.

The Reserve Bank’s residential mortgage lending statistics for July are out and they show there has been a significant drop in total new bank lending.

Total new lending in July was $6.312 billion, as compared to $6.803 billion in June.

Of July’s new lending, investors accounted for $2.337 billion. This was down on the $2.564 billion they borrowed in June.

New lending to owner-occupiers ($3.222 billion) and first home buyers ($689 million) was also down in July.

Higher than 80% LVR lending to investors dropped from $50 million in June to $32 million in July.

While higher than 80% LVR lending to first home buyers also dropped (to $208 million) in July, it increased for owner occupiers (to $191 million).

Further, higher than 70% LVR lending to investors also dropped in July. It was down from $811 million in June to $765 million in July.

The Reserve Bank’s new more comprehensive data breakdowns, which provide information on the Auckland market and lending by payment type, back up the general pattern of decline.

Auckland investors were responsible for $1.589 billion of new lending in July, as compared to $1.761 billion in June.

There was also a noticeable drop in new lending to non-Auckland buyers in July. It was down to $2.844 billion in July from $3.126 billion in June.

New lending to Auckland non-investors dropped only slightly - to $1.879 billion in July from $1.916 billion in June.

Meanwhile, the Reserve Bank’s lending by payment type data, which looks at interest-only and principal-and-interest loans, also shows a drop in investor commitments.

Interest-only loans accounted for $2.544 billion of total new lending in July, while principal-and-interest loans accounted for $3.769 billion.

This is in comparison to June when interest-only loans accounted for $2,705 billion of total new lending, while principal-and-interest loans accounted for $4,098 billion.

However, the amount of interest-only lending to investors took a tumble in July. It was down to $1.256 billion from $1.422 billion in June.

Conversely, the amount of interest-only lending to owner-occupiers (which includes first home buyers) increased in July. It was up to $1.255 from $1.246 in June.

Some commentators have said it will take several months for the full impact of the new LVRs to show on the market.

But NZ Property Investors Federation executive officer Andrew King said the LVRs were already having a big impact on investor activity.

He said that not only had banks been acting in the spirit of the LVRs for new lending for over a month now, but there seems to have been some cracking-down on pre-approved loans too.

Tags: banks Lending Macro Prudential Tools mortgages RBNZ Reserve Bank

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.25 2.59 2.89
ANZ 4.44 ▼2.79 3.19 ▲3.59
ANZ Special - ▼2.19 2.59 ▲2.99
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.25 2.59 2.89
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.25 2.55 ▲2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.85 3.15 ▲3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland ▲5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 ▲3.80 ▲3.90 -
HSBC Premier 4.49 ▼2.19 ▲2.45 ▲2.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.04 3.40 3.84
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.19 2.55 2.99
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.39 ▼2.98 ▼2.79 ▼3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.25 2.59 ▲2.94
The Co-operative Bank - Standard 4.40 2.75 3.09 ▲3.44
TSB Bank 5.34 ▼2.99 ▲3.35 3.59
TSB Special 4.54 ▼2.19 ▲2.55 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 2.85 3.19 ▲3.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 4.59 - - -
Westpac Special - 2.25 2.59 ▲2.99
Median 4.55 2.68 2.99 2.99

Last updated: 10 June 2021 8:55am

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