Loan-to-value restrictions delayed

On 18 August 2016, the Reserve Bank announced it is deferring the start of the proposed changes to investor loan-to-value restrictions (LVRs) nationwide from 1 September to 1 October 2016.

The Reserve Bank also clarified which borrowers would be exempt from the 40% down payment requirement. Here is a summary of the exemptions:

  • Owner-occupiers or investors who 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 who 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 who 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 who 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).
  • Loans made under Housing New Zealand’s Mortgage Insurance Scheme, including the Welcome Home Loans scheme are exempt
  • 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.

As explained in this post, the purpose of the stricter lending criteria was to reduce the risk of the retail bank’s portfolio.


back to home (Property Guide 360