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New Zealand's Central Bank announced plans to ease mortgage loan-to-value ratio (LVR) restrictions from early December, citing stabilised housing prices following a prolonged decline. The move aims to offer banks greater lending flexibility and improve credit access, particularly for first-time homebuyers. With house prices now around 16% below their 2021 peak and lending growth remaining moderate, the Reserve Bank of New Zealand said the timing was appropriate for adjustment, while retaining existing debt-to-income restrictions to maintain borrower resilience.
The Reserve Bank of New Zealand stated earlier this week that it would ease its mortgage loan-to-value ratio (LVR) restrictions from early December, as housing prices have now returned to sustainable levels after a prolonged decline. The Central Bank indicated that the revised policy would enable banks to lend more freely, enhancing market efficiency and access to credit, especially for first-time homebuyers. Advertisement
Under the new framework, 25% of new loans extended to owner-occupiers will be permitted for buyers with deposits below 20% of the property's value, compared to the current 20% limit. Acting Assistant Governor Angus McGregor mentioned that it was an appropriate time to revisit default settings, given that property prices now fall within the Central Bank's sustainable range, mortgage lending growth remains moderate, and the share of high-risk loans is low.
According to data from the Real Estate Institute of New Zealand, housing prices in September were 1.5% lower year-on-year and roughly 16% below their peak levels recorded in 2021. The Central Bank further noted that debt-to-income measures introduced last year continue to support borrower resilience and help contain the potential impact of future housing market corrections. These restrictions will remain in place.
Finance Minister Nicola Willis remarked that the easing of lending limits would make it easier for individuals to purchase their first homes, reflecting the government's intention to support a more accessible housing market.
The Reserve Bank of New Zealand's decision to relax LVR restrictions marks a shift towards a more balanced housing policy amid stabilising prices and controlled mortgage growth. By maintaining debt-to-income measures while loosening lending ratios, the Central Bank aims to strengthen financial flexibility without compromising market stability. The move is expected to encourage first-time buyers and improve access to housing finance, signalling confidence in the resilience of New Zealand's property sector as it transitions from a correction phase to sustainable growth.
Source - Reuters
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