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LVR loosening not enough

The Reserve Bank’s move to relax existing LVR restrictions is welcome but does not go far or fast enough, according to property commentators.

Thursday, November 30th 2017, 9:00AM

by Miriam Bell

Property Institute chief executive Ashley Church

In its Financial Stability Report yesterday, the Reserve Bank announced it would be easing the LVRs slightly from 1 January 2018.

For investors the changes mean that 5% of banks’ new mortgage lending will be able to go to investors with deposits of less than 35%, as opposed to 40%.

When it comes to owner occupiers, 15% (rather than 10%) of banks new mortgage lending will be available to those with deposits of less than 20%.

Reserve Bank Acting Governor Grant Spencer says the changes mean banks will have more latitude with lending decisions.

But he says the Reserve Bank doesn’t believe the easing of the LVRs will have a significant impact on the housing market and urged buyers to continue to be cautious.

The news has been welcomed by those in the property sector – although most say more is needed.

Property Institute chief executive Ashley Church says the speed at which the loosening of the LVRs is proposed isn’t nearly fast enough to address the problems that the rules have created.

“While it’s good to see that common sense has finally prevailed, the speed at which the Reserve Bank is proposing to relax the rules means the move will have very little effect.

In his view, the LVR restrictions appear to be the leading cause of a dramatic drop in the number of homes available for rental.

“These rules didn’t just impact on first home buyers – they also locked investors out of the market – and the chickens let loose through that particular action are now coming home to roost.”

Big increases in rents in many parts of the country are likely, primarily due to a shortage in the supply of rental housing caused by the imposition of the LVRs on property investors, Church says.

For Harcourts NZ CEO Chris Kennedy, the LVR adjustments offer stability, but don’t go far enough in aiding first home buyers get a foot on the property ladder.

He says the changes might help stem the drop in sales seen in some regions, particularly Christchurch and Auckland, as some buyers will be able to re-enter the market.

“I think it will spark some new activity, particularly in areas like Auckland, where supply is still an issue.

“But those still trying to break into markets like Auckland, aren’t really going to find the changes a big help.”

It seems like the Reserve Bank is testing the market with minor changes, Kennedy says.

“Hopefully, if the market stabilises rather than rebounds with this slight easement, the bank will feel confident to ease restrictions further in the months ahead.”

Read more:

RBNZ to ease LVR restrictions 

LVR easing sooner than expected 

« Free Investment Property Showcase Events: Auckland, Wellington and ChristchurchApartment consents slump »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 ▼3.29 ▼3.45 ▼3.85
ANZ Special - ▼2.79 ▼2.95 ▼3.35
ASB Bank 4.45 ▼3.35 ▼3.19 ▼3.85
ASB Bank Special - ▼2.85 ▼2.69 ▼3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - ▼2.79 2.99 ▼2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.75 3.99 4.39
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 ▼2.80 ▼2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC ▼4.40 ▼2.95 ▼2.95 ▲3.69
Kainga Ora 4.43 3.55 3.85 4.14
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - ▼2.65 ▼2.79 ▼3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - ▼2.99 ▼3.05 3.69
The Co-operative Bank - Owner Occ 4.40 3.09 3.35 3.69
The Co-operative Bank - Standard 4.40 3.59 3.85 4.19
TSB Bank 5.34 ▼3.59 ▼3.79 ▼4.19
TSB Special 4.54 ▼2.79 ▼2.99 ▼3.39
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.79 ▼2.79 3.39
Median 4.55 3.50 3.79 3.69

Last updated: 25 May 2020 5:00am

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