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RBNZ Relaxes Lending Rules

By Rachel Radford

The RBNZ has made the decision to further relax the rules around loan to value ratios (LVRs), which will offer our housing market a much-needed adrenaline shot.

An LVR is how much you borrow, compared to the value of the thing you’re buying. It’s expressed as a percentage. So, if you’re buying an apartment worth $500k and you have a $50k deposit, your LVR is $450,000 ÷ $500,000 or 90%. A lower LVR means less risk to the bank and that’s why, in 2013 when the housing market was peaking, the RBNZ tightened the LVR for lenders.

Since mortgage and house price growth are now slowing, the risk of lending is smaller. So the boa constrictor on LVRs is being loosened to more of a bow tie. From 1 January 2019 Guvna Orr’s new rules will apply:

  • up to twenty percent (increased from 15) of new mortgage loans to owner occupiers can have deposits of less than 20%.
  • up to five percent of new mortgage loans to property investors can have deposits of less than 30% (down from 35).

If banks do as they’re asked and, our economy purrs along, the RBNZ might ease LVR restrictions even more. Exciting times for new borrowers…

If you need help to better understand how this impacts you, or how I can help you into a competitive loan, get in touch.

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This article was supplied by Bruce Patten, International Mortgage Broker of the Year 2006 – 2017.  Bruce is always on hand to answer any questions you may have about loans or anything else around the loan process. Feel free to get in touch with him anytime via phone (021 661 114) or email (bruce.patten@loanmarket.co.nz).

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