From 1 March 2021, loan-to-value ratio (LVR) restrictions will be back in place, changing the way both investors and first home buyers are able to access bank lending. LVRs were removed in 2020 following the COVID-19 outbreak. But now, in an effort to cool the New Zealand property market which has performed far better than expected, The Reserve Bank of New Zealand has one again implemented LVR restrictions Here’s what this means for you.
As a first home buyer
LVR restrictions limit the amount that banks can lend against a property. From 1 March 2021, owner-occupiers buying a home will once again be subject to LVR restrictions.
That means banks will be limited to doing at least 80 per cent of all new lending to owner-occupiers with a 20 per cent deposit or more. This is the same level that LVRs were at before they were removed in 2020.
If you’re struggling to save a 20 per cent deposit, consider some of these options for a first home deposit:
- KiwiSaver First Home Withdrawal or HomeStart Grant
- First Home Loans through Kāinga Ora – Homes and Communities
- Family guarantor or cash gift
In this blog, you’ll find more information about these deposit options for first home buyers.
As always, it’s important you present the best home loan application to accurately and effectively show your ability to repay your loan. At Mortgage Express, we understand what banks are looking for when it comes to first home buyers and low-deposit borrowers, and can help you put together a solid application that best presents your situation.
As an investor
From 1 March 2021 until 30 April 2021, property investors will be required to hold at least a 30 per cent deposit in order to access bank lending. This is the same level that LVRs were at when they were removed in May 2020 due to COVID-19.
From 1 May 2021, property investors will need a 40 per cent deposit and banks will be limited to doing a maximum of just 5 per cent of new lending at LVRs above this figure.
This staged approach has been implemented to allow banks time to manage their loan pipelines with applications already approved but not yet settled. But all new loan applications will be expected to meet the new rules.
Homeowners and property investors with equity in existing properties may be able to leverage that equity to buy further investment properties without having to dip into savings. More on this topic in this blog. Or you can find out more by talking to one of the Mortgage Express Advisers.
As a homeowner
While the reintroduction of LVR restrictions does not impact existing homeowners, this may be a signal that any COVID-19 financial hardship assistance is likely to be coming to an end. That could make it more challenging getting approval for further mortgage holidays or deferrals, or changing to an interest only loan or extending a loan term.
As always though, whether it’s a first home buyer, an existing homeowner, or a property investor, presenting the best application is the key to success. Get in touch with the Mortgage Express team to find out more about LVRs and their impact on your situation, and to get guidance and advice with your mortgage application.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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