Mortgages

LVR easing talk grows

Investors might soon get a break if the Reserve Bank relaxes the LVR restrictions in its next Financial Stability Report as some economists are suggesting it will.

Friday, October 12th 2018

Since the Reserve Bank eased the LVR restrictions for investors – to a 35% deposit requirement from 40% - at the start of this year, there has been talk of further LVR loosening.

While the Reserve Bank is treading carefully in its approach, house price growth has not surged dramatically upwards in the wake of the initial LVR move.

Instead housing market growth nationwide has started to slow and sales activity has been noticeably more subdued.

The Reserve Bank has long said that if housing market risks decline and banks new mortgage lending standards are prudent it would consider easing the LVRs further.

Given the housing market has stabilised considerably, there has been an increase in economist predictions that the Reserve Bank could be poised to act on the LVRs again. 

Kiwibank economists say the Reserve Bank’s criteria for loosening LVR rules may have been satisfied by recent economic trends.

They believe that a “modest” 5% cut could happen and that a move to a 30% deposit "wouldn’t threaten the integrity of the system”.

The Reserve Bank’s next Financial Stability Report is due on November 28 and Kiwibank’s economists are picking the LVRs will be addressed then.

Infometrics has just released their latest economic forecasts which highlight “a plethora of risks that could lead to disappointing economic growth outcomes during 2019 and 2020”.

“If that does occur, the government or Reserve Bank could be forced to respond with more stimulatory fiscal or monetary settings,” Infometrics’ chief forecaster, Gareth Kiernan says.

That could mean the Reserve Bank will cut interest rates or ease the LVRs next year.

Meanwhile, BNZ chief economist Tony Alexander recently assigned a 50+% chance to the Reserve Bank easing LVR requirements in a cyclical manner in their November Financial Stability Report.

That’s because he sees nothing in front of him suggesting that house prices are going to fall away to any degree or that they will newly bound up again.

“This house price growth cycle ended two years ago in Auckland and the rest of the country will join in the flatness soon and there really is nothing new and special going on.”

Westpac has been predicting that the Reserve Bank will loosen the LVRs for some time.

 

Comments

No comments yet

Most Read

SBS FirstHome Combo 4.29
Unity First Home Buyer special 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
TSB Special 4.89
Kiwibank Special 4.89
ASB Bank 4.89
Westpac Special 4.89
BNZ - Std 4.89
AIA - Go Home Loans 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
ASB Bank 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.