RBNZ details eased LVR restrictions

Feedback was sought from registered banks in late April on the implementation of the proposal. Following a review of the feedback received, the decision has been made to proceed with easing the restrictions.

“In making this decision it is important to reiterate our assessment that the risks to financial stability posed by high-LVR lending have reduced to a level where we believe the current restrictions may be unnecessarily reducing efficiency,” deputy governor Christian Hawkesby said.

Restrictions on high-LVR residential mortgage lending set a ‘speed limit’ on how much new low-deposit lending banks can do.

From 1 June 2023 LVR restrictions will be eased, from:

• 10% limit for loans with LVR above 80% for owner occupiers, and
• 5% limit for loans with LVR above 60% for investors

To

• 15% limit for loans with LVR above 80% for owner occupiers, and
• 5% limit for loans with LVR above 65% for investors.

The previous LVR settings were put in place November 2021 when risks were elevated. The restrictions built resilience in the financial system, which has been evident in the past year as house prices have fallen without widespread impacts to financial stability.