LVR Start date deferred unit 1 October 2016
The Reserve Bank is deferring the start of the proposed changes to investor loan-to-value restrictions (LVRs) nationwide from 1 September to 1 October 2016, based on feedback from the banking industry from its recent consultation on the proposals.
Deputy Governor, Grant Spencer, said: “Banks have indicated through their submissions that more time is required to enable them to meet the new restrictions that apply to investor loans nationwide, given the pipeline of loan pre-approvals made prior to our announcement in July.
“We understand that banks have been applying the new LVR restrictions to new loan applications since the LVR changes were announced. On that basis we will defer the formal introduction of the changes to 1 October in order to accommodate the backlog of pre-approvals.”
Mr Spencer noted there had been a number of queries related to exemptions. He clarified that the range of existing exemptions to LVR restrictions will continue to apply under the proposed changes. These exemptions permit the banks to make high LVR loans that would otherwise be limited by the restrictions. Exemptions apply where:
· Owner-occupiers or investors are constructing or purchasing a new dwelling (provided the loan commitment occurs prior to, or at an early stage of, construction of the dwelling).
· Owner-occupiers or investors require bridging finance to complete the purchase of a residential property on a date prior to the completion of a sale of another property.
· Owner-occupiers or investors are re-financing an existing high LVR loan, or shifting an existing high LVR loan from one property to another (provided the total value of the new loan does not increase).
· Owner-occupiers or investors are borrowing to fund extensive repairs or remediation that is not routine or deferred maintenance. This includes events such as a fire, natural disaster, weather tightness issues or seismic strengthening).
· A loan is made under Housing New Zealand’s Mortgage Insurance Scheme, including the Welcome Home Loans scheme.
· Borrowers with owner occupied and investor collateral can use the combined collateral exemption to obtain finance up to 60% of the value of the investment properties and 80% on their owner occupied property.
“It is important to emphasise that these exemptions are permissive but do not create an obligation on the banks to make such loans. The banks will still apply their own lending criteria to individual borrowers and may choose to not provide finance in these circumstances or to provide it only at lower LVRs.
“The consultation process closed on 10 August and we are continuing to analyse submissions. Further adjustments to the proposals, including the exemptions, are still possible and we expect to publish a final policy position later this month,” Mr Spencer said.
Under the proposed new restrictions:
· No more than 5 percent of bank lending to residential property investors across New Zealand would be permitted with an LVR of greater than 60 percent (i.e. a deposit of less than 40 percent).
· No more than 10 percent of lending to owner-occupiers across New Zealand would be permitted with an LVR of greater than 80 percent (i.e. a deposit of less than 20 percent).
· Loans that are exempt from the existing LVR restrictions, including loans to construct new dwellings, would continue to be exempt.
It is more important than ever with these regular legislation and lending policy changes to get the right advice so as to understand how this could potentially affect you.
The banks policies have never differed as much as they do now, we at Loan Market Queenstown can help guide you through these differences and make sure you are with the right lender to achieve your goals.
At Loan Market Queenstown we are here to help and make the process easy. Get in touch today.