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Reserve Bank ends LVR restrictions

The Reserve Bank has decided to remove loan to value ratio restrictions for 12 months in response to the Covid-19 crisis.

Thursday, April 30th 2020, 8:31PM 1 Comment

In an announcement this afternoon, the central bank said the removal of LVR rules would take effect for 12 months. The changes come into effect on May 1.

The RBNZ said the decision was made "to ensure LVR restrictions didn’t have an undue impact on borrowers or lenders as part of the mortgage deferral scheme implemented in response to the Covid-19 pandemic".

The Reserve Bank’s move came after a regulatory impact assessment and "robust feedback" from submitters, after a week long consultation period.

RBNZ deputy governor Geoff Bascand said:

"Although the consultation period was short by the Reserve Bank’s typical standards, this was necessary to respond swiftly to an unprecedented set of economic events. The feedback raised a number of valid points and concerns which were all carefully considered.”

The decision is likely to provide a boost to home buyers, ending restrictions put in place during 2013. Yet advisers say banks may not change their internal LVR controls, rendering the move ineffective.

The Reserve Bank acknowledged concerns "the ability of people to service a mortgage will likely decline in the coming months".

Bascand said the removal of LVR rules took into account concerns about financial stability.

“Given the current uncertainty around the economic outlook, the Reserve Bank considers that it is unlikely that banks will weaken lending standards to high risk borrowers. The more likely risk is that banks are overly cautious with lending to credit-worthy borrowers.”

The Reserve Bank hopes the action "will also avoid any uncertainty around the implications of LVR limits from the mortgage deferral scheme". “It is important banks continue to provide support to credit-worthy borrowers during these extraordinary times," Bascand added.

The central bank will review LVR rules in 12 months' time, Bascand said.

Tags: banks home loans interest rates investment Lending LVR mortgage holiday mortgages RBNZ Reserve Bank

« Reserve Bank to scrap LVR restrictionsOCR reaction: Reserve Bank open to lower, negative rates »

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Comments from our readers

On 1 May 2020 at 11:30 am Redflick said:
I doubt that banks themselves will do 100% finance at least not until they can see some stability in pricing. Also some people that were preapproved for finance have now been advised their preapproval is withdrawn and they need to reapply- apparently many banks concerned about the quality of the jobs that many applicants have

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Full Rates Table | Compare Rates

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 4.95 - - -
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 2.95 3.45 -
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 ▼2.45 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 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

Last updated: 21 September 2020 10:48am

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