Since October, banks have been able to lend no more than 10% of their new loans to borrowers with a deposit of less than 20%.
But new low-deposit lending has been running at about 5% of new loans.
Reserve Bank deputy governor Grant Spencer said this morning that the pressures in the housing market were easing although there were still factors that could be a problem, such as a shortage of stock in Auckland and Christchurch.
“We believe that LVRs are achieving their purpose. The financial system is less vulnerable to an adverse housing shock and banks are now less exposed to potential credit losses as the interest rate cycle turns upwards,” he said.
“We’ve stated that the LVRs are temporary, but before removing them we want to be confident that the housing market is responding to interest rate increases; and that immigration pressures are not causing a resurgence of house price pressures. It will take some time to gain this assurance. At this stage we consider the earliest date for beginning to remove LVRs is likely to be late in the year.”
Harcourts chief executive Hayden Duncan said the restrictions had the most impact in provincial New Zealand, where the housing market had not been overheated.
He said Auckland and Christchurch’s rising prices were a direct result of high demand and low supply. “This means the restrictions have had little effect on overall prices. Instead they have made it temporarily more difficult for first-home buyers to break into the property market.”
He said: “As our population increases, LVR restrictions will become increasingly ineffectual in Auckland. In Christchurch the rebuild is a long way from catching up with demand for housing. The restrictions have only ever been intended as a temporary measure, and I would applaud moves by the Reserve Bank to end them.”
Duncan said agents were reporting that first-home buyers were coming back into the market and meeting the 20% deposit requirements through options such as second-tier lenders and family borrowing. “I congratulate the Reserve Bank for recognising the LVR restrictions are coming to the end of their usefulness.”
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