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.

 

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