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Hints LVR rules could go

Loan-to-value restrictions may be eased as interest rates move back to more normal levels, Reserve Bank deputy governor Grant Spencer says.

Friday, March 28th 2014, 12:00AM

by Susan Edmunds

In a speech to the Credit Suisse Asian Investment Conference, he said the Reserve Bank had made it clear from the beginning that the restrictions were not meant to be permanent.

The current cycle of OCR tightening might have had to have been sharper without the rules, he said, but now it was under way, it could give the Reserve Bank scope to lift the restrictions.

Since October, banks have been able to lend no more than 10% of their new loans to borrowers with a deposit or equity smaller than 20%.

“To be clear, the monetary policy tightening cycle that is now under way is motivated by the need to ensure that CPI inflation remains in the vicinity of 2% over the medium term. The boost to financial system resilience provided by the LVR restrictions, as well as a decision to increase risk weights for high-LVR housing lending, has meant that monetary policy has not needed to consider a tightening for financial stability purposes," he said.

"However, while not motivated by the financial stability objective, the monetary policy tightening is expected to help in dampening further house price inflation. In this regard, as interest rates move back to more normal levels, we will expect to have greater scope to ease or remove the LVR restrictions.”

He said the Reserve Bank expected to lift the restrictions once pressures in the housing market had moderated and it could be confident there would not be a resurgence in house price inflation.

“A decision to ease or remove LVR restrictions will ultimately take into account both the financial stability and price stability implications of doing so. We will be alert to the risk that the removal of LVR restrictions could produce a resurgence in house price inflation, which would potentially undermine both financial and price stability."

Spencer said the rules seemed to have had the effect intended.

It had been estimated that the LVR restrictions would dampen annual house price growth by one to four percentage points and house sales by 3% to 8%.

“The evidence to date suggests that the dampening effect of the LVR restrictions on house prices has been broadly in line with these expectations.”

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.15 ▼4.04 4.49
ANZ Special - 3.65 ▼3.54 3.99
ASB Bank 5.20 4.15 4.09 4.39
ASB Bank Special - 3.65 3.59 3.89
BNZ - Classic - 3.65 ▼3.54 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 ▼4.15 ▼4.09 ▼4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.34 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.59 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.69 3.69 ▼3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.65 3.59 3.99
The Co-operative Bank - Standard 5.15 4.15 4.09 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - 3.65 ▼3.54 3.99
Median 5.35 4.15 4.09 4.19

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