Calls to review LVR restrictions for Auckland home buyers

by Krizzel Canlas23 May 2019

It is time for the Reserve Bank of New Zealand (RBNZ) to formally review its six-year-old policy on loan-to-value ratios (LVRs) for Auckland first-home buyers, says one real estate boss.

According to Century 21 New Zealand national manager Ryan Mitchell, the blanket high deposit requirements are simply keeping too many first-home buyers out of the housing market.

His comment follows recent industry data, which confirms Auckland’s slowdown both in the number of sales and prices reached, as well as Official Cash Rate (OCR) cut to a record low by RBNZ.

“It’s actually cruel that so many are denied the opportunity of home ownership during a time of record low-interest rates and steadying prices because of this outdated and unnecessary measure,” Mitchell said. “I appreciate the Reserve Bank is committed to an ongoing appraisal of the situation. However, the time for a formal and specific review has arrived.

“It’s abundantly clear that the tough LVRs are no longer needed. In fact, in Auckland they’re now counter-productive. There has been some tweaking at the edges but much more now needs to be done. It’s time the policy reflected the 2019 market, not the 2013 one,” he noted.

RBNZ’s adjustment achieved a fairly muted market response, with little sign of more Kiwis rushing to take out home loans despite some of the lowest interest rates in over 50 years.

Read more: Beware of stricter lending criteria, mortgage advisor warns

“Many couples could easily service a mortgage but struggle to come with a 20% deposit, not helped by high rents and living costs,” Mitchell said. “In many cases, the required deposit in Auckland is at least $200,000! That’s a huge barrier to entry.

“Of course, first-home buyers should always be required to stump up a decent deposit,” he added. “However, them also getting a fair go is now well overdue.”

Meanwhile, the RBNZ announced it completed a detailed evaluation of LVRs as part of a wider review of macroprudential policy. It found that LVR restrictions promote financial stability.

“By improving the resilience of both households and banks, LVR policy has played a useful role in promoting financial stability during a period of heightened housing market risks,” RBNZ Deputy Governor and head of financial stability Geoff Bascand said.

Most Read

NZ Adviser TV