Loan-to-value ratio (LVR) speed limits continue to have a “strong effect” on investors, according to CoreLogic.
The comment follows Reserve Bank of New Zealand (RBNZ)’s latest report showing a drop in investor borrowing – with only $1.02 billion last month compared to $1.24 billion in August 2018.
Kelvin Davidson, senior property economist at CoreLogic, described the figures as “pretty soft” – with only 1% of lending to investors going to those with less than 30% deposit.
"This hints at a restraint from the speed limit, and hence investors could be a key group that would benefit from a potential loosening of the LVR rules in November,” Davidson said.
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Davidson believes that the low rates and loosening serviceability tests could provide a short-term boost to the market, especially as banks have started “loosening their internal 7% to 8% serviceability tests” over the past month.
“This will have given a little more impetus to borrowers – and there surely has to be a good chance that this will have continued in September,” he said.
He added that it’s important to keep in mind the looming, extra bank requirements and their effect on mortgage rates.
“Potentially they may start to rise… The bulk of mortgages in New Zealand are on fixed rates, which will shelter borrowers for a period of time,” Davidson predicts.
“But that clearly won’t be forever, and so market activity could well face some stronger headwinds later next year and into 2021.”