29 Nov 2017

Loan-to-value ratios to ease in January

11:45 am on 29 November 2017

The Reserve Bank announced today it will ease loan-to-value ratios for home buyers.

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LVR restrictions to be eased from 1 January. Photo: Composite

From January, banks will be allowed to have up to 15 percent of their lending to first home buyers with less than a 20 percent deposit.

Currently, the limit is 10 percent of new loans.

And investors will need a 35 percent deposit - from 40 percent currently.

The acting governor of the Reserve Bank, Grant Spencer, said the changes are unlikely to add heat to the housing market.

Grant Spencer says the restrictions could be eased further, as long as prices remained contained.

The changes to the LVRs were widely expected after a slowdown in the housing market.

The growth in house prices nationally is slowing, and in some parts of Auckland, prices have even been falling.

LVR policies first came into place in 2013 in an attempt to curb the risks associated with rapidly rising house prices.

The Reserve Bank said LVR restrictions will continue to be eased over time provided that financial stability risks remain contained.

"Gradual adjustment to policy will reduce the risk of resurgence in the housing market and a deterioration in lending standards," the Reserve Bank explained in the report.

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