Today the Reserve Bank acting assistant governor of financial stability Angus McGregor said that over the past year the bank had reviewed its approach to home loan lending restrictions, and specifically the loan to the value ratio (LVR) restrictions. He has said that it is to relax restrictions from December on lending by banks making it easier for low deposit borrowers.
Changes to Home Loan Lending Restrictions
Mortgage advisers have been suggesting for some time that due to the soft property market the LVR rules should be relaxed if not removed. It would of course help first home buyers which everyone wants to see an easier path to home ownership, and while house prices have been lower it seemed like the perfect time to introduce changes to the home loan lending restrictions.
Finally the Reserve Bank has listened, and these changes to the LVR rules will certainly help more Kiwi’s in buying a home.
These changes will give the banks the ability to lend money to more Kiwis and especially first home buyers. The hope is the banks can then open up the low deposit lending to more than just existing bank customers, as that will mean that people can have more choices and therefore be able to select a better bank.

What Are The Changes?
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The changes to the home loan lending restrictions are certainly that – for both those Kiwis buying their first home and also for those first time property investors. The changes to the LVR rules will allow the banks to lend more from December and only time will tell how they manage this within the banks.
for Home Owners
They have said that banks will be allowed to do up to 25% of new lending to owner-occupiers with a deposit of less than 20%. This is an increase on the current speed limit of 20%.
This should increase the available funds that banks can lend by 20% and that is welcome news.
for Property Investors
They also said that banks will be allowed to do up to 10% of lending to investors with deposits or equity of less than 30%, which is up from the current speed limit of 5%.
Why Could They Make Changes Now?
The Reserve Bank is always going to be cautious, but at least they have made a change.
With house prices now within the range of sustainable estimates, and growth in mortgage lending remaining moderate the Reserve Bank think that the share of high-risk lending is low and therefore can ease the home loan lending restrictions a bit.
Therefore they are saying now is an appropriate time to move to the new default settings.