The chances of first-home buyers getting a mortgage may improve, with a proposal to allow banks to lend more to low-deposit borrowers.
The Reserve Bank (RBNZ) is consulting on easing loan-to-value ratios (LVR) – one of its policies to keep house prices and risky borrowing in check.
Acting assistant governor financial stability Angus McGregor said the introduction of debt-to-income ratios (DTI) last year has improved the protections against risky lending, while the market was also subdued.
“House prices are within our range of sustainable estimates. Growth in mortgage lending remains moderate and the share of high-risk lending is low.
“Easier LVR settings will give banks more flexibility to lend, improving market efficiency and access to credit, particularly for first-home buyers.”
More lending for low-deposit borrowers
The RBNZ is proposing to let banks have up to 25% of new lending to owner-occupiers with less than a 20% deposit.
For investors, the lending limit would be increased to 10% for those with less than a 30% deposit.
The current limits are 20% for owner-occupiers and 5% for investors.
The central bank said it would consult with banks and proposed that the new limits should come into force in December.
Finance Minister Nicola Willis said easing the restrictions should help first-time buyers.
“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder.”
Guardrails against hot housing markets
The LVRs were brought in in late-2013 to counter the surging housing market, which was being fuelled by low-deposit lending.
They were suspended during the start of the Covid-19 pandemic in 2020, but reinstated a year later as the housing market was reignited by cheap money.
As an added protection against the hot housing market and the possible fallout in the event of a major crash, RBNZ brought in debt-to-income ratios in July 2024, limiting most owner occupiers to loans of no more than six times their gross income, and investors to no loans of no more than seven times their income.
McGregor said the newly formed Financial Policy Committee would administer and set the LVR and DTI policies.
