LVR easing leading to more borrowing enquiries

BY TIM KEARINS, CENTURY 21 NEW ZEALAND

The Reserve Bank’s easing of LVR restrictions is already seeing more first-home buyers making enquiries with banks and brokers.

This follows the Reserve Bank easing the loan-to-value ratio (LVR) limits on lending to owneroccupier borrowers with less than a 20 percent deposit, as well as allowing property investors to have a lower deposit.

The new, lesser LVR restrictions took effect on 1 June. It now means the previous 10% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 60% for investors has lifted to a 15% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 65% for investors.

The Reserve Bank was right in its assessment that the previous limits, which were put in place at the height of the pandemic, were now too tight and may be blocking creditworthy borrowers from borrowing.

This provides banks, brokers, and importantly, borrowers a little more wriggle room. Anecdotally, we are hearing that lenders are getting more enquiries. Nonetheless, borrowing remains tough.

Also encouraging is the fact that while the property market has fallen about 17% since the peak in late 2021, the rate of decline is reportedly slowing. Further, in its monetary policy statement last month, the Reserve Bank said house prices had fallen to a more sustainable level.

REINZ recently reported that real estate agents across the country are seeing glimpses of green shoots in the market as first-home buyers show more interest after the Reserve Bank’s announced on the easing of LVR restrictions.

Let’s not forget that rents are still high, and for many if they can organise a mortgage and buy this winter, they won’t look back. As well as softer prices, vendors are gradually becoming more attuned to realistic expectations. Many vendors are also keen to sell before the General Election campaign which sees Kiwis delaying their decisions.

The arrival of Credit Contract & Consumer Finance Act (CCCFA) saw a serious credit crunch from late 2020. Despite some Government tweaking since, big retail banks continue to conduct ultra-conservative assessments on all new borrowers.

If prospective property buyers can stump up a deposit and prove their ability to service a mortgage, they might be surprised with what a mortgage broker can offer. To help their cause, new borrowers should also consider getting in a flatmate or boarder. That income could make all the difference in getting them over the line.

Mortgage brokers have come into their own in the past couple of years and are playing a key role in 2023 getting more Kiwis into home ownership. The likes of Julius Capilitan of Century 21 Financial do all the running around, delivering competitive rates and greater borrowing flexibility than traditional banks.

The latest easing of the LVRs is a positive for first-home buyers, who should look into it if they haven’t already.

www.century21.co.nz