The Reserve Bank has announced changes to the loan-to-value ratio (LVR) lending that will make it easier for first-time buyers and investors to purchase homes.
Effective January 2019, these changes will see the 35% deposit required of investors drop to 30%, while also loosening restrictions placed on loans for owner-occupied properties.
Currently, only 15% of a bank’s owner-occupier loans can be given to people with deposits at or below the 20% threshold. However, the Reserve Bank says this number will increase by 5% to allow more owner-occupiers buying opportunities.
These revisions will be the first major changes to LVR lending since the requirement of a 20% deposit was introduced in 2013.
A change that especially affected first-time buyers, the 20% deposit and other LVR restrictions have seen the proportion of outstanding mortgage debt in New Zealand decrease.
Households with loans larger than 80 percent of their value (classified as a high-LVR) have fallen from 20 percent in 2013 to under 7 percent in 2018.
Acknowledging debt as a continuing concern, the Reserve Bank says the risk on New Zealand’s financial stability posed by high household debt has reduced, and therefore LVR restrictions can be too.