RBNZ may ease lending restrictions

Loan-to-value (LVR) limits on low-deposit lending by banks may be eased if risks to the financial system are considered to have lessened.

LVRs restrict banks from lending any more than 20 percent of their lending to first home buyers with less than a 20 percent deposit, and no more than 5 percent for residential property investors with less than a 30 percent deposit.

The LVRs were imposed in 2013 to reduce the risk for banks as house prices surged by as much as 20 percent a year, and a large part of bank lending was going to borrowers with low finances.

Reserve Bank deputy governor Geoff Bascand told a conference on Monday that LVRs have helped to reduce the risk to banks and also cool the growth in house prices.

He said the biggest threats to banks have been credit growth and the high level of household debt.

 Bascand said an easing in LVRs was possible if credit growth and house prices remain subdued, and banks remain sensible in their lending.

The Reserve Bank's role in implementing policy and supervising banks is currently being reviewed, but Bascand said it needed to be operationally independent.

In May, the Reserve Bank said LVRs had helped to cool the housing market and debt growth but risks remained, and the restrictions were still needed.

Newsroom is powered by the generosity of readers like you, who support our mission to produce fearless, independent and provocative journalism.

Become a Supporter


Newsroom does not allow comments directly on this website. We invite all readers who wish to discuss a story or leave a comment to visit us on Twitter or Facebook. We also welcome your news tips and feedback via email: contact@newsroom.co.nz. Thank you.