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New Zealand's central bank will relax mortgage LVR rules from December, allowing banks to lend a higher proportion of loans to buyers with deposits under 20%. Acting Assistant Governor Angus McGregor highlighted that the move will improve credit access, especially for first-time homebuyers, while supporting market efficiency. House prices are now roughly 16% below their 2021 peak, with moderate lending growth and limited high-risk lending. Debt-to-income restrictions introduced last year will remain, helping maintain borrower resilience and moderating the potential impact of future housing market adjustments.
New Zealand's central bank has confirmed it will relax mortgage loan-to-value ratio (LVR) restrictions starting December, following a period of declining house prices that are now considered to be within sustainable levels. The changes are intended to give banks greater flexibility in lending and to make it easier for homebuyers, particularly first-time buyers, to access credit. Advertisement
Acting Assistant Governor of the Reserve Bank of New Zealand, Angus McGregor, explained that the eased LVR settings would improve market efficiency while maintaining financial stability. Under the revised framework, banks can allocate 25% of new loans for owner-occupiers to buyers with deposits of less than 20% of the property value, an increase from the current 20% limit.
McGregor stated that this is an appropriate time to review the default settings, as house prices are now within the central bank's sustainable range, mortgage lending growth remains moderate, and high-risk lending continues to be low. According to data from the Real Estate Institute of New Zealand, house prices in September declined 1.5% compared with the same period last year and are approximately 16% below their peak in 2021.
The central bank also highlighted that debt-to-income restrictions, introduced last year to strengthen borrower resilience, will remain in effect. These measures are expected to help contain the impact and severity of any housing market corrections, ensuring that lending remains responsible.
Finance Minister Nicola Willis noted that relaxing the restrictions on how much banks can lend would help more people buy their first homes, supporting affordability and better access to housing. Observers suggest that the combination of eased LVR rules and continued debt-to-income limits will maintain a balance between improving credit availability and preventing excessive borrowing.
Source Reuters
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