News that the Reserve Bank is proposing to remove its mortgage loan-to-value ratio (LVR) restrictions will mean young Kiwis can buy their first homes sooner with lower deposit requirements now inevitable, says Century 21 New Zealand Owner Derryn Mayne
Yesterday the Reserve Bank announced over the next seven days it will consult on its proposal to scrap LVRs for at least a year. This comes in response to the economic downturn caused by the Covid-19 pandemic.
This is actually long overdue. Let’s not forget tough LVRs were introduced back in 2013 to cool the property market. Within a few years they’d had their desired effect, and the restrictions were subsequently softened. However, Century 21 has been among those in the industry calling for the wider need of LVRs to be reviewed. This proposal then is welcomed news.
Scrapping LVRs would be a timely boost for the real estate industry, as it simply provides more Kiwis the chance to get on the property ladder.
Deposits will still be required by banks, but they’ll have greater flexibility to assess mortgage applications case by case. In recent years, the rigid LVR restrictions have sadly forced many Kiwis to keep renting, and we’ve seen less ‘mum and dad’ property investors buying and overseeing the country’s rental stock.
Thankfully the days of requiring a 20% deposit from most owner-occupiers look set to be over. In Auckland the LVR restrictions have meant you’ve likely needed to save a six-figure sum before the bank could even consider lending you money. Sadly, it created two tiers of young people – those whose families could financially help them into a house and those who couldn’t.
This will give every Kiwi a fairer crack at getting into the housing market. What’s more, with record-low interest rates locked in and fairer prices inevitable, it’s set to be an attractive buyers’ market.
Owner of Century 21 New Zealand