The Reserve Bank of New Zealand will proceed with its proposal to tighten Loan-to-Value Ratio (LVR) restrictions on lending to owner-occupiers to reduce risky mortgage lending.
Deputy Governor and general manager for Financial Stability Geoff Bascand says from 1 November, RBNZ will restrict the amount of lending banks can do above an LVR of 80 per cent to 10 per cent of all new loans to owner-occupiers, down from 20 per cent at present.
“We launched our consultation earlier this month after observing that despite previous adjustments to LVR restrictions, house prices remained unsustainable and the risks of a housing market correction had continued to rise, increasing risks to economic and financial stability,” he said.
“Restricting high-risk lending will help prevent these problems getting worse.”
Bascand said RBNZ’s consultation proposed implementing the new LVR settings from 1 October. “However, given the disruptions from heightened COVID-19 alert levels to customers and banks in managing or completing purchases associated with existing pre-approvals, we are delaying our implementation start date to 1 November. We expect banks to comply with the spirit of the new restrictions immediately.”