LVR restrictions tweaked

It was announced in May that from October 1, Auckland investors would have to have 30% deposit for their new lending.

Banks would not be able to lend more than 2% of their new loans to investor borrowers who had less than that.

But the Reserve Bank said today that it had increased that speed limit in response to submissions, to 5%.

The changes have also been pushed back a month, to November 1.

Andrew King, president of the Property Investors Federation, said the move was a welcome one but did not go far enough.

"It should never have happened in the first place."

He said restrictions on investor borrowing would just push up rents.

Investors should be encouraged to provide more rental properties in Auckland, not fewer, he said.

Outside Auckland, banks will now be allowed to lend 15% of their new loans to borrowers with less than 20% equity, up from 10% at the moment. That change has also been pushed back to November.

Construction loans remain exempt, even for Auckland investors.

There is also an exemption for investors taking loans for non-routine remediation work, such as fixing a leaky building.

The Reserve Bank said the changes were needed because Auckland house prices had risen a lot compared to income.

It said prices were higher in Auckland compared to income than in the rest of New Zealand and that increased the risk of a sharp price fall in future.

“The absence of a severe housing market downturn in the last 20 years is not evidence that one could not occur.”