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.
Authored by:
Derryn Mayne
Owner of Century 21 New Zealand
(021) 399-431