The RBNZ has made the decision to further relax the rules around loan to value ratios (LVRs), which will offer our housing market a much-needed adrenaline shot.
An LVR is how much you borrow, compared to the value of the thing you’re buying. It’s expressed as a percentage. So, if you’re buying an apartment worth $500k and you have a $50k deposit, your LVR is $450,000 ÷ $500,000 or 90%. A lower LVR means less risk to the bank and that’s why, in 2013 when the housing market was peaking, the RBNZ tightened the LVR for lenders.
Since mortgage and house price growth are now slowing, the risk of lending is smaller. So the boa constrictor on LVRs is being loosened to more of a bow tie. From 1 January 2019 Guvna Orr’s new rules will apply:
If banks do as they’re asked and, our economy purrs along, the RBNZ might ease LVR restrictions even more. Exciting times for new borrowers…
If you need help to better understand how this impacts you, or how I can help you into a competitive loan, get in touch.
__________________________________________
This article was supplied by Bruce Patten, International Mortgage Broker of the Year 2006 – 2017. Bruce is always on hand to answer any questions you may have about loans or anything else around the loan process. Feel free to get in touch with him anytime via phone (021 661 114) or email (bruce.patten@loanmarket.co.nz).
This is your chance to become a Night Knight, as Ronald McDonald House Charities New Zealand is on a mission to raise more than $150,000 for struggling families. All Families need to be together and not worry about where to sleep or where their next meal will come from. If … Read more
Over 400 families will spend Christmas at a Ronald McDonald House while their child is in a hospital away from home. Drop a present into our office from 29th November to 17th December and we’ll make sure it gets to a deserving family. A little Ray of Giving is a … Read more