Breaking News – Loan to Value Ratio Changes

Restrictions on loan-to-value ratios (LVRs) are temporary limits on banks to reduce the amount of low-deposit mortgage lending. Prudent lending standards are important for the long-term health of the banking system and the economy. The Reserve Bank dropped the LVRs in May 2020 for a year to ensure banks could go ahead with the mortgage deferral scheme put in place because of the Covid-19 pandemic and to ensure credit kept flowing into the market.

However, this week the Reserve Bank Governor, indicated that as of March 2021, LVR rules will be re-introduced to make lending restrictions tighter for loans secured by investment property, in response to the growing housing market rises across NZ. High-LVR loans in this category are those loans that are more than 70% of the property’s value (30% deposit). The effect of this is that Investors will have to find 30% deposit on non-owner occupied houses whereas Owner Occupiers will still eb able to borrow on 15-25% deposit depending upon their financial circumstances.

BUT…

ASB to bring in own LVR restrictions ahead of Reserve Bank rules

ASB says it won’t wait for the Reserve Bank to bring back Loan to Value Ratio (LVR) restrictions for investors in March.
It is doing it now.

ASB will move immediately to increase the minimum deposit required from investors to 30 per cent in the wake of the Reserve Bank of New Zealand’s announcement.

“While we appreciate the RBNZ taking the time to consult, this is about helping Kiwis build their financial futures during exceptionally challenging times so we are choosing to take this step now.”

ASB spokesperson Shortt said the lending market had improved markedly since New Zealand went into its first lock down.

Covid-19 hadn’t impacted the property market as anticipated and ASB is now witnessing rapid growth in lending volumes.

The number of applications it had received was at an all-time high, up 70 per cent on this time last year, and while the proportion of first home lending was up, there had also been a rapid increase in lending for investors.

If this increase in investor demand continues it could lead the country down a potentially unsustainable path, Shortt said.

“Our focus at ASB is on working with the Government on offering first home buyers’ opportunities to get onto the property ladder.
That’s why we’re immediately committing to requiring investors to have a 30 per cent deposit rather than the current 20 per cent.”

Pre-approvals already in place are unaffected.

“For us, it is about being a prudent and responsible lender. We all have to play our part and we’re confident Kiwis looking to buy their first home will welcome this move,” Shortt said.

A DAY LATER…

ANZ to increase investor property loan deposit to 30pc

A second major bank says it will increase the deposit requirements for investors to buy property from 20 per cent to 30 per cent.

ANZ, New Zealand’s largest bank, will bring in the higher deposit rate from December 7 and comes on the back of rival bank ASB announcing yesterday that it would immediately increase the requirement to 30 per cent for investors.

On Wednesday the Reserve Bank said it would consult on bringing loan to value ratio restrictions back from March 1. LVRs restrict how much banks can lend to low deposit borrowers.

But an unexpected booming property market has seen calls by economists to bring the restrictions back sooner.

Ben Kelleher, ANZ NZ managing director personal, said the bank had been closely monitoring the impact of low interest rates and reduced LVR requirements on the residential property market.

“It’s in everyone’s interests for residential property prices to be sustainable long term, and for home ownership to be accessible to as many Kiwis as possible.”

Kelleher said in October, which was record home lending month for ANZ, 31 per cent of its home loan commitments were to property investors while 19 per cent was to first home buyers.

“Today we’ve made the decision to increase the deposit required by property investors to 30 per cent, up from the current 20 per cent for new home lending applications from 7 December.

“As a responsible lender it’s important for us to help customers make good borrowing decisions, and that customers have a level of borrowing they can comfortably pay back. Covid-19 has made the housing market and lending decisions more complex, and we believe that any steps we can take to increase balance and sustainability in the market is the right thing to do.”

Managing Director, Retail and Business Banking - ANZ New Zealand

PM Jacinda Ardern hints at lifeline for first-home buyers getting into recession-proof market

New Zealand Prime Minister Jacinda Ardern

Prime Minister Jacinda Ardern has hinted the Government is looking into ways to help first-home buyers onto the property ladder by tinkering with the restrictions of its home-buying subsidy scheme.

It comes as her government continues to come under pressure over New Zealand’s red-hot housing market, which continues to soar as the rest of the country grapples with a recession.

While facing questions this morning, Ardern revealed the Government was looking into adjusting the thresholds around the home-start grants to make it easier for first-time buyers to get into the market.

The home-start grant enables first-time buyers access to $5000, or $10,000 as a couple, towards their first property.

There are a number of restrictions at the moment – including an earning limit of $85,000 per person, or $130,000 for a couple.

Ardern wouldn’t say which areas of the eligibility requirements might be shifted, but she was clear that the Government was exploring making some changes.

“Those are a good place for us to look at and say ‘are there ways that we can enable more first-home buyers the use those products?”

In summary, now harder for Investors to borrow money and easier for Owner Occupiers!