The Reserve Bank’s easing of LVR restrictions is already seeing more first-home buyers making enquiries with banks and brokers, says Tim Kearins, Owner of Century 21 New Zealand
As of 1 June, loan-to-value ratio (LVR) limits on lending to owner-occupier borrowers with less than a 20 percent deposit have been loosened and property investors are allowed to have a lower deposit.
The looser restrictions mean the previous 10% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 60% for investors has lifted to a 15% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 65% for investors.
This provides banks, brokers, and importantly, borrowers a little more wriggle room. Anecdotally, we are hearing that lenders are getting more enquiries.
The Reserve Bank was right in its assessment that the previous limits, which were put in place at the height of the pandemic, were now too tight and may be blocking creditworthy borrowers from borrowing.
Nonetheless, borrowing remains tough.
The arrival of Credit Contract & Consumer Finance Act (CCCFA) saw a serious credit crunch from late 2020. Despite some Government tweaking since, big retail banks continue to conduct ultra-conservative assessments on all new borrowers.
Mortgage brokers have come into their own in the past couple of years and are playing a key role in 2023 getting more Kiwis into homeownership.
If prospective property buyers can stump up a deposit and prove their ability to service a mortgage, they might be surprised with what a mortgage broker can offer. To help their cause, new borrowers should also consider getting in a flatmate or boarder. That income could make all the difference in getting them over the line. The latest easing of the LVRs is another boost to prospective borrowers.
Also encouraging is the fact that, while the property market has fallen about 17% since the peak in late 2021, the rate of decline is reportedly slowing. Further, in its monetary policy statement last month, the Reserve Bank said house prices had fallen to a more sustainable level.
REINZ recently reported that real estate agents across the country are seeing glimpses of green shoots in the market as first-home buyers show more interest after the Reserve Bank’s announced on the easing of LVR restrictions.
Let us not forget that rents are still high, and for many, if they can organise a mortgage and buy this winter, they won’t look back. As well as softer prices, Century 21 agents are reporting that vendors are finally getting more realistic. Many vendors are also keen to sell before the General Election campaign, which sees buyers delaying their decisions.
