Easing LVRs good news for first-home buyers

BY TIM KEARINS, CENTURY 21 NEW ZEALAND

It’s good news that the Reserve Bank is easing LVR (loan-to-value ratio) restrictions. It’s not only helpful for first-home buyers, but will be a timely boost for the wider real estate sector.

The Reserve Bank will ease LVR restrictions from 1 June, from a 10% to 15% limit for home loans with an LVR above 80% for owner occupiers, and a 5% limit for loans with an LVR above 60% to a 5% limit for loans with an LVR above 65% for investors.

Restrictions on high-LVR residential mortgage lending set a ‘speed limit’ on how much new low-deposit lending banks can do. Current LVR settings were put in place November 2021 when risks were elevated. The Reserve Bank now believes current restrictions may be unnecessarily reducing efficiency and impeding the provision of credit to some otherwise creditworthy borrowers. The fact that banks will soon be able to approve up to 15% of their new lending to owner-occupiers borrowing more than 80% is good news. In short it means, fewer first-home buyers will need a 20% deposit to buy a house.

This will go some way to improving access to credit, with the hurdles still proving too high for many despite applicants’ ability to earn and service a mortgage.

A 20% deposit is a big ask in this environment when everyone is dealing with a cost-of-living crisis. This move will enable a few more Kiwis to get over the line and onto the housing ladder.

REINZ has released its Monthly Property Report for April – a month which saw median prices across New Zealand decrease 10.9% yearon-year to $780,000. Days to sell have risen to 47 days for April 2023 — up nine days compared to April last year.

It’s pretty slow, but understandably. Kiwis are playing a wait and see game – as to inflation peaking, interest rates settling, and of course we have a general election in October which always sees some stalling. For those looking to buy, however, opportunities are plentiful with vendors increasingly realistic. Those paying sky-high rents and seeing softening purchase prices should also look into government assistance schemes on offer, including First Home Grants, First Home Loans, and First Home Partner.

First Home Grants give eligible first-home buyers up to $20,000 for a deposit. First Home Loans allow eligible buyers to purchase a home with a five percent deposit with no price caps. First Home Partner is a shared ownership scheme to help aspiring first-home buyers purchase a home together with Kāinga Ora.

Prospective borrowers should not give up, with mortgage brokers like Julius Capilitan of Century 21 Financial well worth an approach. We know it has been frustrating, but a lesser deposit could now be doable. Borrowers may also be eligible for one of the Government’s first-home schemes. Given all the property opportunities out there this winter, we’re saying to renters, borrowing and buying is now well worth a second look.

www.century21.co.nz