From January 2018, the Reserve Bank is easing lending restrictions for home buyers and property investors. In place since 2013, LVRs were introduced to help slow rapid house price inflation and rising household debt. While only an incremental change has been confirmed, it’s likely to have a positive impact on first home buyers.
A modest easing of restrictions
The Reserve Bank of New Zealand announced in late November 2017 that it would be easing lending restrictions from January 2018.
From the start of next year, the cap on banks’ new mortgage lending to owner occupiers with an LVR greater than 80 per cent would increase from 10 per cent to 15 per cent.
Likewise, restrictions for investors have eased slightly. Currently, only 5 per cent of banks’ lending is to investors with a deposit of less than 40 per cent, but from January 2018 banks will be able to do 5 per cent of their lending to investors with less than a 35 per cent deposit.
Reserve Bank Governor Grant Spencer said LVR policies have helped improve banking system resilience substantially, and that pressures on the housing market over the past six months have continued to moderate because of a further tightening of LVRs, a firming of bank lending, and an increase in mortgage rates.
In light of these developments, he said, the Reserve Bank would undertake a modest easing of restrictions, but would monitor the impact of changes and make further adjustments if financial stability risks remain contained.
A glimmer of hope for first home buyers
Whilst it’s unlikely much impact will be felt by investors, for first home buyers struggling to enter the property market with less than a 20 per cent deposit, the easing of restrictions offers a glimmer of hope.
Combined with a cooling housing market across the country and relatively low mortgage rates, this could be the opportunity many first home buyers have been waiting for.
As always though, it pays to be prepared before applying for finance. Here are some of the ways you can ensure you have the best possible chance of securing finance.
- Know your financial position – be prepared to prove your income and expenses with bank statements, proof of income and KiwiSaver investment details.
- A good credit record – pay off any consumer debt and always pay your bills on time.
- Manage your expectations – work out what you can realistically afford and stick to your budget.
Talk to our team
If you’d like to find out how to get into property market – either as a first home buyer or a property investor – and how a change in LVR is likely to affect you, talk to one of our team of professional and knowledgeable mortgage advisers.
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