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Reserve Bank tightens LVR rules for investors

Investors will need a 40% deposit to get a mortgage under new rules to be enforced by the Reserve Bank of New Zealand.

Tuesday, February 9th 2021, 10:10AM 2 Comments

The central bank has announced a new "60/5" speed limit for investor lending, which will come into effect from May this year. 

Under the rule, banks will only be allowed to lend 5% of their book to investors above 60% LVR.

In effect, it means most investors will struggle to borrow unless they can provide a 40% deposit.

RBNZ deputy governor Geoff Bascand said: "We are now concerned about the risk a sharp correction in the housing market poses for financial stability. There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged.

"A growing number of highly indebted borrowers, especially investors, are now financially vulnerable to house price corrections and disruptions to their ability to service the debt. Highly leveraged property owners, in particular investors, are more prone to rapid ‘fire sales’ that potentially amplify any downturn."

Bascand said he expects lenders to impose the "60/5" rule on their books "immediately".

The restrictions are being introduced as the Reserve Bank and Government plan to take some of the heat out of the housing market, with investors copping the blame for soaring demand and price inflation. 

ASB, ANZ and BNZ have imposed their own 40% deposit requirements on investors in recent weeks.

The RBNZ's new investor rules will be staggered.

From March 1, lenders will be subject to a "70/5" rule, meaning they can only lend 5% of their book to investors above 70% LVR. The stricter limit comes into play two months later.

Owner-occupiers will be subject to pre-Covid LVR limits.

Lenders will only be able to provide 20% of new lending to owner-occupiers above 80% LVR. 

Tags: investor lending Lending LVR RBNZ Reserve Bank

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Comments from our readers

On 9 February 2021 at 11:57 am Amused said:
So let me get this right. The Reserve Bank in April last year lowered the bank deposit requirements for investment mortgages. COVID impacting property investors was their rationale but this never made any sense. At the same time the Reserve Bank did everything in their power to lower interest rates for borrowers which has had the same flow on effect to the returns that people receive on their savings at their bank.

That the Reserve Bank didn’t consider the possibility that property might then become the preferred form of investment for most New Zealanders despite all the warning signs of rising house price inflation is deeply troubling.

The Reserve Bank are the ones that created the current market frenzy in the housing market. Not investors!
On 16 February 2021 at 12:03 pm jimmynz said:
Only 2 things will fix this. 1. Investors can only build new not buy existing stock and 2. Get rid of interest only loans for investors THAT will sort out the housing market for sure. Even at low interest rates, the repayments between IO and P&I is quite significant on a large mortgage. I have a number of investment properties with a split of IO and P&I and I know it would start effecting my cashflow if this was enforced. Secondly, PLEASE fix the RMA it's a mess. Spend more on infrastructure and open up more land, it'll pay off long term. We also pay ridiculous prices for building materials down here, compare to even Aussie they are so much cheaper to build. Less money to those creaming it on products and more per hour wages for tradies will balance the scale to build new and put more money in workers pockets will draw more people into trades too. Sure the developers are making good money at the moment, but they are increasing supply and putting up the risk - they aren't directly influencing house prices they are just making the most of the current market. Supply and Demand, Economics 101.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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