First Home Buyers and Property Investors Rejoice as Loan-To-Value Ratio Limits are Eased
The Reserve Bank of New Zealand (RBNZ) has loosened restrictions on bank property lending, which is already seeing more first-home buyers and property investors making enquiries with banks and mortgage brokers – including here at Become Wealth.
The LVR restrictions are now:
15 percent limit (currently 10 percent) for loans with LVR above 80 percent for owner occupiers, and
5 percent limit for loans with LVR above 65 percent (currently 60 percent) for investors.
The newer limits allow property investors and first-home buyers alike to have a lower deposit.
At the time of the change, Deputy Governor Christian Hawkesby said the risks to bank finances from low deposit lending had reduced. The current limits, which were put in place in November 2021 at the height of the pandemic, were now too tight and may be blocking creditworthy borrowers from borrowing.
The restrictions have built resilience in the financial system, which had been strong in the past year amid falling house prices, Hawkesby said.
"It is important to reiterate our assessment that the risks to financial stability posed by high-LVR lending have reduced to a level where we believe the current restrictions may be unnecessarily reducing efficiency," he said.
Here at Become Wealth, while we are seeing more mortgage applications, borrowing remains tough due to:
Interest rates which are closer to their historical average, though that’s high for those of us who became accustomed to lower rates in recent years!
Changes ot the Credit Contract & Consumer Finance Act (CCCFA) in 2021 resulting in many lenders applying ultra-conservative assessments on all new borrowers.
While the property market has fallen about 17% since the peak in late 2021, it’s encouraging to see the rate of decline is reportedly slowing. Further, in its monetary policy statement last month, the Reserve Bank said house prices had fallen to a more sustainable level.
There are still plenty of ways forward to obtain lending for a motivated buyer who can stump up a suitable deposit, for instance, getting in a flatmate or boarder to add extra income and improve the ability to service a mortgage. That extra little income boost can sometimes make all the difference to getting a mortgage application over the line.
Our lending team, including mortgage brokers (“advisers”) are standing by to help you work through any of the topics mentioned above, get in touch today.
You may also like:
High Income Skills for 2023
Boost your earning power with these 21 high income skills you can learn without a degree