Mortgage Express has called attention to a ‘LVR loophole’ in the new restrictions, saying it is making it difficult for home owners who are between selling their existing home and buying a new one.
The mortgage company is calling the Reserve Bank to provide greater clarification to banks and financial lenders around LVR restrictions, saying owner-occupiers are finding they cannot purchase property before selling their existing home without triggering new 40% loan to value ratio requirements.
Mortgage Express NZ CEO Sarah Johnston says banks and other financial institutions are not eager to approve open-ended bridging finance for home owners in the wake of new LVR restrictions, which are aimed at investors.
She says if an owner-occupier buys before having sold their existing home, technically that makes them an investor and the new investor LVR ratio requiring a 40% deposit comes into play.
If investor LVR rules are not applied to the bridging finance, there is a risk that home owner could simply say they had been unable to sell the house and were now keeping it to avoid being classed as an investor.
“It’s very unclear and until that loophole is fixed there are legitimate owner-occupiers who are being shut of out the market because the banks haven’t been given clarification on how to apply the new rules in a ‘buy before selling’ situation.”
Harcourts NZ CEO Chris Kennedy says it is vital that the restrictions for home owner/occupiers are clarified for lenders immediately.
“At the moment the situation around borrowing seems extremely messy and unclear. We’ve always been pretty sceptical that the new LVR ratios for investors would slow down the market as planned.
“In an extremely competitive market, homeowners often find themselves trying to buy before they sell to avoid missing out on their dream home. And without clarification around the rules, LVR restrictions appear to be effectively shutting the people out of the market they were designed to help.”
But Satish Kamath of Mt Eden’s Mortgage Mantra told the NZ Herald that there were no issues with the new LVR restrictions.
"Lenders are in fact being careful with this situation. In an ideal situation, they are asking for evidence of an unconditional sale of an existing property before making an offer on the proposed new purchase," Kamath said.
"I've just managed to secure a conditional approval for my clients. Their situation is they have bought at auction and are now selling their existing property.The property that they have purchased will be the family home. The existing property is their current family home. The lender has given us a conditional approval subject to the unconditional sale and settlement of the current property," he said.
According to the NZ Herald, the Reserve Bank is refusing to comment.