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LVR limits will return for investors

The odds of LVR restrictions returning for investors next year are "fairly high" due to the strength of the residential property market, according to economist Tony Alexander.

Friday, October 16th 2020, 9:59AM

by Dan Dunkley

Tony Alexander

At the end of April, the Reserve Bank scrapped loan-to-value ratio restrictions for owner-occupiers and investors for one year, removing previous LVR "speed limits" on what the banks could lend.

The decision, along with the official cash rate cut in March and vast quantitative easing programme, have boosted the housing market through 2020 in spite of the global pandemic.

Latest REINZ data reveals that 8,377 properties sold nationwide in September – which was a 37.1% year-on-year increase.

Investors have dived back into the market in recent months, borrowing more at high LVRs.

As the housing market continues to heat up, leading economist Tony Alexander believes the central bank will reintroduce LVRs for investors come May next year.

"I think that the chances of the 30% deposit requirement coming back for investors are fairly high given the strength in the residential real estate market," Alexander told landlords.co.nz's sister publication TMM Online.

The outlook may be different for owner-occupiers and first home buyers.

Recent comments from the Reserve Bank indicate it views the recent surge in house prices as helpful to the economy. Officials recently said falling house prices would be the "worst-case scenario" for our economy as it recovers from the Covid recession.

Alexander said the RBNZ may be more inclined to extend the LVR-free period for owner-occupiers.

"Given the bias which the Reserve Bank has toward generating as much momentum as possible in the economy, they may hold off reimposing those requirements for a few months after May. But this far out, it's still fairly much a guessing game," he said.

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Tags: banks house prices housing market investment landlords Lending LVR Macro Prudential Tools mortgages price growth property investment RBNZ real estate REINZ Reserve Bank Tony Alexander

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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 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 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
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
Kainga Ora - First Home Buyer Special - 2.25 - -
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
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - - - -
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 ▼3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.49 2.69 2.79
Median 4.55 2.94 2.99 2.80

Last updated: 23 October 2020 5:00am

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