Reserve Bank Eases Lending Rules to Boost First-Home Buyers from December

Changes to bank lending rules that will help people to buy their first homes have been welcomed by Finance Minister Nicola Willis.

The Reserve Bank has announced that it is increasing the percentage of new lending commercial banks can provide to home buyers with smaller deposits.

The easing of the Reserve Bank’s Loan-to-Value Ratio (LVR) restrictions will help more young families to achieve the Kiwi dream of owning their own homes, Nicola Willis says.

Presently, commercial banks are only permitted to allocate 20 per cent of new home loan lending to owner-occupiers with deposits of less than 20 per cent.

From next month, banks will be able to allocate 25 per cent of their new home loans to people with deposits of less than 20 per cent.

This means more opportunities for people to get a foot on the property ladder.

Typically, about 80 per cent of those with deposits of less than 20 percent are first-home buyers who are currently taking advantage of lower prices and lower mortgage rates.

Cotality reported that in the three months to September, first-home buyers accounted for a record 27.7 per cent of property purchases nationwide.

The changes to the Reserve Bank’s Loan-to-Value Ratio (LVR) restrictions take effect on 1 December.

The Reserve Bank has also announced that it is increasing the share of loans commercial banks can make to property investors with deposits of less than 30 per cent from 5 to 10 per cent.

Nicola Willis says the changes follow the Reserve Bank’s introduction of debt-to-income (DTI) restrictions last year.

The Reserve Bank’s view is that the DTI restrictions increase the resilience of the banking system and means LVR restrictions can be eased.