In a surprise move the Reserve Bank has deferred implementing its stricter loan-to-value ratio (LVR) restriction on housing investors, with banks wanting more time to process backlogs of preapproved mortgage loans.
The more stringent LVR announced in July, requiring all housing investors to have a minimum 40% deposit, was set to come into force on September 1, but that was yesterday pushed out to October 1.
Reserve Bank deputy governor Grant Spencer warned while there were multiple exemptions, the banks would ultimately decide whether to finance mortgages or not.
Mr Spencer that said banks’ recent submissions were that more time was needed for them meet the new restrictions, given the backlog of loan preapprovals made before moves to tighten the LVR in July.
"We understand that banks have [already] been applying the new LVR restrictions to new loan applications since the LVR changes were announced.
"On that basis we will defer the formal introduction of the changes to October 1 ... to accommodate the backlog of preapprovals," Mr Spencer said in a statement yesterday.
Analysts of recent real estate industry data have noted they were yet to see much impact from the new LVR restrictions, with a chronic shortage of listings in many areas underpinning near-record values and house prices.
Mr Spencer clarified that the range of existing LVR exemptions would continue to apply under the proposed changes.
However, he also emphasised banks were not obliged to make such loans, and they would apply their own lending criteria "and may choose to not provide finance in these circumstances".
The exemptions include those applying to owner-occupiers and investors who are constructing or buying a new dwelling; who require bridging finance to complete a purchase; who are refinancing an existing high-LVR loan; or who are borrowing to fund extensive repairs which are not routine or deferred maintenance.
Also exempt are loans made under Housing New Zealand’s Mortgage Insurance Scheme, including the Welcome Home Loans scheme.
Mr Spencer said borrowers with housing collateral could use the combined collateral exemption to obtain finance of up to 60% of the value of an investment property and 80% of an owner-occupied property.
Among restrictions faced by the banks is a condition that no more than 5% of a bank’s lending be to residential property investors with a deposit of less than 40%.
No more than 10% of a bank’s lending can be to owner-occupiers with a deposit of less than 20%.
