New Zealand wide loan to value ratio (LVR) restrictions – what you need to know as an investor


Can you still buy under the new LVR rules? The new loan to value ratio restrictions will affect investors as well as owner-occupiers throughout New Zealand, so it pays to understand the key points and the impact these LVR's could have on you.

It has recently been well publicised that further loan to value ratio restrictions (LVR's) are being introduced by the Reserve Bank to counterbalance the apparent continuing rise in house prices and are due to take effect on 1 September 2016. 

The Reserve Bank has put out a consultation paper in relation to the proposed changes and once fully in effect will potentially have an impact on those wanting to invest in the property market.

One area of risk the Reserve Bank has identified is in the investor lending market.  Low interest rates have buoyed investment in the property sector and this area does not appear to be slowing. The new LVR's are proposed to recognise this higher risk lending. The proposed new restrictions are summarised as follows:

  • A maximum of 5% of bank lending to residential property investors would be permitted with an LVR of greater than 60% (i.e. a deposit of less than 40%);

  • A maximum of 10% of lending to owner-occupiers would be permitted with an LVR greater than 80% (i.e. a deposit of less than 20%);

  • Loans already exempt from current LVR restrictions would continue to be exempted.

Importantly, many of the previous LVR's have only been targeted at Auckland given the concerns in the housing market in this area. These restrictions will apply across New Zealand and are another aim at balancing the housing sector. 

Consultation on these restrictions closes on 10 August 2016 however we are already seeing many banks adopting the principles of these restrictions. It appears if you are looking to invest in property these restrictions will likely already apply.

For more information, please contact a member of our Property Team to discuss.

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