Let’s talk about LVRs. Did they actually change?
Not exactly. What has changed is the Reserve Bank of NZ’s requirements of trading banks in NZ to abide by mandated rules that had been put in place.
On the 30th of April the Reserve Bank decided to remove mortgage loan-to-value ratio (LVR) restrictions for 12 months. The decision was made to ensure LVR restrictions didn’t have an undue impact on borrowers or lenders as part of the mortgage deferral scheme implemented in response to the COVID-19 pandemic.
A potential by-product was that the trading banks could revert to higher LVR lending with no macroprudential restrictions being placed on them until the 1st of May 2021, this however, has not been at all forthcoming.
In the owner-occupied sector we have seen little to no change with banks by and large still limited to a maximum LVR of 90%. There has been some minor loosening whereby pre approvals to 90% are slightly more accessible, but lending over 90% is few & far between, (although we have kicked the “odd goal” in this space).
The banks get a lot more interested in stretching their boundaries when there is a live sale and purchase agreement in place, but this does little to instil confidence in buyers or the market.
In the investor space there has been some loosening with a couple of the mainstream banks now pushing out to 80% LVR, but most are still sitting firm at 70%.
The banks are taking a “watching brief” on the property market to see what impacts post COVID bring to property values, but to date with values holding strong, it would only take one bank to move and we could see a relaxing in this space – we will monitor and keep you up to date.