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LVR speed limits kept on hold

The Reserve Bank has kept LVR speed limits on hold amid fears low interest rates "could lead to a resurgence in higher-risk lending".

Wednesday, November 27th 2019, 9:08AM

The RBNZ has made the call as part of its latest Financial Stability Report, released this morning. 

LVR limits have been "successful in reducing the more excessive household mortgage lending", The Reserve Bank said. The central bank added LVR rules have improved the resilience of banks to a deterioration in economic conditions. 

Yet fears of excessive high LVR lending have made the central bank decide against loosening rules from current levels.

NZFSG’s Bruce Patten said the decision “wasn’t a surprise, given the low interest rates and renewed market activity”.

He added: “It would have been a little irresponsible to make any changes, although a change in the first home buyers LVR allowance would have been a nice Christmas present for some.”

Glen McLeod of Edge Mortgages said borrowers, particularly first home buyers, were in a "strange situation". 

He added there was "no respite for home loan purchasers to get a home above 80% LVR". "I question the restriction for first home buyers only being able to max purchase at $600,000.00," he said.

In its FSR report, The Reserve Bank said financial system vulnerabilities remain "elevated" and international risks have increased. 

RBNZ Governor Adrian Orr sounded caution about the low rate environment leading to increased debt and inflated asset prices.

The FSR report stated: " Long-term interest rates have declined in a number of countries, including New Zealand, and are expected to remain low for a prolonged period.Low rates are necessary, and have helped to cushion the New Zealand economy and borrowers from the effects of weaker global growth.

"Over the longer term, prolonged low interest rates could lead to some borrowers taking on too much debt and for asset prices to become overheated. This could increase the vulnerability of the economy and borrowers to future economic downturns."

Current LVR rules will remain in place for the medium term. Up to 20% of loans to owner-occupiers can have deposits of less than 20%, and up to 5% of home loans to investors can have  a deposit of less than 30%.

Tags: RBNZ Reserve Bank

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 ▼2.93 ▼3.07 ▼3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 ▼3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 ▼3.55 ▼3.49 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.05 3.13 3.12

Last updated: 14 August 2020 1:06pm

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