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Ease in LVR restrictions for end of year

Reserve Bank eases LVR restrictions, House prices remain stable and Overall mortgage borrowing is down nationwide.

The end of the year is nearly here, and it has been an interesting one on the property front.

As we all wind down for Christmas I have written a brief update on the property situation as we see it now that some of the dust has settled following the General Election and the change of Government.

Just today the Reserve Bank of New Zealand announced that it would ease the LVR restrictions that have been in place for the last few years. From the 1st of January 2018 Banks will be allowed to lend up to 15% (currently 10%) of their total lending volume to Owner Occupiers with an LVR of over 80%.

They will also be able to lend 5% of the total lending volume to residential property investors with an LVR of over 65% (currently 60%)

These new levels will be subject to review.

This could be very good news for First Home Buyers as it may be easier to obtain lending of between 80 and 90%. It will be interesting to see if the banks feel comfortable to increase lending in the high LVR space in line with the Reserve banks relaxation of the restrictions.

It could also mean good news for property investors who can now borrow up to 65% of the value of an investment property. This will increase the equity position and therefore the borrowing capacity of many investors.

 

Other interesting property stats:

Over the last 12 months overall mortgage borrowing is down on the previous years in all categories

First Home Buyers down 6%
Other Owner Occupiers down 15%
Investors down 17% and
borrowing for business down 20%

This is due partly to borrower uncertainty in Election year, partly to the LVR restrictions and partly to tighter lending conditions imposed by the banks.

Let’s hope that all those factors lift as we go into the new year. On the other hand, the reserve bank does not wish to see house price inflation take off to previous high levels which is why they have signalled that they will be reviewing the effects of today’s announcement closely.

In the last 12 months, sales volumes have dropped overall by nearly 30% (a big portion of this drop is in investment property sales) but house prices have remained stable at a median price of $480,000 nationwide.

More properties are coming on to the market now which is helping to meet the strong demand that is still there.

Interest rates are holding well, and we have even seen the reduction of some 2-3 years fixed rates.

There is still a lot of added value in using a good mortgage broker who understands the market and can find the most appropriate loan and provide the advice and customer service that people need.

May I take this opportunity to wish you all a great Christmas and best wishes for a happy and prosperous new year.