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Reserve Bank to scrap LVR restrictions

[UPDATED] The Reserve Bank is set to remove loan-to-value ratio restrictions on mortgages in the wake of the Covid-19 outbreak.

Tuesday, April 21st 2020, 10:37AM 1 Comment

The central bank wants to scrap the LVR restrictions "in response to the economic downturn caused by the Covid-19 pandemic", it said this morning.

The Reserve Bank has opened a seven day consultation on the decision, and if effected, the change will be made in the bank's Condition of Registration, it said.

If the restrictions are lifted, it would mark the end of nearly seven years of LVR limits. The rules were introduced in October 2013 to curb house price growth and limit high risk property purchases.

The lifting of LVR restrictions would provide a major boost to the investor market which has been stymied by the lending limits in recent years.

“LVRs were introduced as a macro-prudential financial stability tool in October 2013 and have been adjusted over time," said Reserve Bank deputy governor Geoff Bascand.

"Adjusting the use and calibration of macro-prudential tools in response to economic conditions is how they are intended to be used."

Under current rules, relaxed last year, banks can issue no more than 20% of their mortgages to owner-occupiers borrowing more than 80% of the property's value.

Banks cannot issue more than 5% of their home loans to investors with less than a 30% deposit.

The lifting of LVR restrictions could be temporary, however.

The Reserve Bank said restrictions would be lifted for a year, but added it would consider reintroducing them after the worst of the Covid-crisis. It would "monitor lending activity and feedback from retail banks over the next 12 months", and would "review whether to reinstate LVR restrictions".

REINZ chief executive Bindi Norwell welcomed the Reserve Bank's move. She said it would be particularly important for first home buyers as many have had their planned deposits reduced due to a Covid-19 related decline in their Kiwisaver funds.

“It is interesting to note that the Reserve Bank’s proposal doesn’t appear to make any distinction between first time buyers, owner occupiers or investors. This is welcome news as COVID-19 is negatively impacting so many people from a financial perspective around the country.

“As always, we would remind people to take a prudent approach to any borrowing, to ensure they are not over leveraged in the long term."

 

Tags: Lending LVR mortgages property investment RBNZ real estate Reserve Bank

« Banks roll out mortgage holidayReserve Bank ends LVR restrictions »

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Comments from our readers

On 23 April 2020 at 12:46 pm 1133 said:
Perhaps the Reserve Bank and the Inland Revenue Dept. need to get together and remove Speculation Tax for the same period. Many people will need to sell for no other reason than to keep their business solvent, and they certainly would not want a Property/ Speculation Tax thrown in as well.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
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 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
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 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
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 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

Last updated: 10 July 2020 9:02am

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