Easing of Loan-to-Value Ratio Restrictions

A few weeks ago, the Reserve Bank released their Financial Stability Report.  They advised that the risks in NZ’s financial system have eased.  Therefore, they are going to ease the current Loan-to-value ratio (LVR) restrictions that are in place for banks.

The Reserve Bank introduced LVR restrictions for new mortgages back in 2013.  This was to reduce the amount of low deposit lending available.  It essentially created speed limits that the banks had to follow.

So, what is a Loan-to-value ratio or LVR for short?  It is the amount of a loan that a bank lends against a property, compared to the value of that property.  For example, if you’re buying a property for $500,000 and you have a deposit of $100,000, your loan amount required is $400,000.  The LVR will be 80%.  The calculation to work this out, is like this: $400,000 ÷ $500,000 x 100 = 80%.


What’s changing?

From 1 January 2019, the Reserve Bank will allow:

  • No more than 20 percent (increased from 15%) of new mortgage loans to owner occupier borrowers who have deposits of less than 20 percent.
  • No more than 5 percent of new mortgage loans to property investors can have deposits of less than 30 percent (lowered from 35%).


So, what does all this jargon mean?

It should provide a boost for the housing market.  It’s good news if you are a first home buyer!  You’ll know that it’s tough saving for a deposit and it could mean that home ownership could be a step closer.  This is because the banks have more lending allocation to give out, increasing your chances of obtaining an over 80% lend at a time when you’ve found that perfect property.

The banks have their own restrictions in place, so even though the Reserve Bank have eased the restrictions; the flow on effect can vary between the banks and what it will ultimately mean for an existing or new customer who is looking at an over 80% lend for their owner-occupied home.


Ready to buy?

Contact us, if you’re a first home buyer and you’re planning on seeking a pre-approval and need a home loan in that over 80% space.  We’ll be able to keep you up-to-date with what’s happening when January rolls around.  Email us at –  info@connectmemortgages.co.nz