LVRs need to be reduced, expert

by Kelly Gregor19 Feb 2018

It’s time for the Reserve Bank to further reduce LVRs, especially for first-home buyers in Auckland, Century 21 national manager Geoff Barnett says.

“The LVRs were introduced a few years ago to help cool what was a crazy Auckland housing market, and they have worked. A review on the LVR restrictions now needs to happen as too many Auckland first-home buyers are missing out because of this outdated measure,” says Mr Barnett.

“With rents still rising, for many securing a low interest rate now and buying would be a better option. But with most still needing a 20 percent deposit, it’s impossible for many. In fact, for Auckland first-home buyers looking at the average priced house, the required deposit would be around $200,000.”

While LVRs have softened since the beginning of the year, further reductions are needed.

“From 1 January RBNZ undertook a modest easing of the restrictions. No more than 15% (was 10%) of each bank’s new mortgage lending to owner occupiers can be at LVRs of more than 80%. While no more than 5% of each bank’s new mortgage lending to residential property investors can be at LVRs of more than 65% (was 60%).

“I agree with QV that continual surging rents will likely motivate renters to enter the housing market, but what will enable them to do just that is reducing the required deposit.

“Like many others, I would actually like to see the Reserve Bank make first-home buyers totally exempt from such blanket high deposit requirements, much like new builds are.

“Of course, they should still pay a deposit and their savings history and ability to service the mortgage must still be heavily scrutinised. However, such an exemption is unlikely to happen in the short-term.

“Nonetheless it’s time first-home buyers got a fairer go,” Barnett said.

“My concern is not with investors as they can mostly structure their business and lending to make it work. It’s young Aucklanders the RBNZ needs to consider.

“They should be able to take advantage of the low interest rates while they last, but they can’t even get out of the starting blocks because of one big blunt tool that Auckland no longer even needs,” Barnett added.

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