A mortgage broker said an immediate cooling of the property was not expected. Photo / Getty Images
By Anan Zaki from RNZ
Restrictions in the real estate market are becoming more and more stringent as loan-to-value ratio restrictions are put in place.
From today, the amount of loans that banks can give to homeowners with small deposits will be cut in half to not exceed 10%.
But despite the tougher loan conditions, a mortgage broker said people shouldn’t expect an immediate chill for the property.
The Reserve Bank’s decision means that fewer people with a house deposit of 20 percent or less will get bank financing.
Now banks can only allocate ten percent of their loans to this higher loan-to-value ratio.
John Bolton of mortgage broker Squirrel said there will always be options for low deposit holders.
âKeep in mind that new construction is exempt, and if you think of a lot of the activity of first-time homebuyers these days, it is actually new construction, off-plan housing, terraces, apartments and maybe small houses in some of these new developments. “
LVR loan restrictions are already stricter for investor loans.
The Reserve Bank’s policy is designed to curb subprime lending among first-time home buyers who might borrow too much when interest rates are low.
But Bolton said the new rules won’t stop the summer sales.
âIf you look at the market right now it’s still pretty hot out there and I think most people sort of think that when New Zealand goes through this latest round of Covid and we get out of the restrictions it there will be a bit of a push, as in the past, as there is clearly a shortage of goods on the market right now.
“I think it helps keep the prices pretty high.”
ANZ Bank’s latest housing market report shows house price inflation remains high but slowing.
Its chief executive, Antonia Watson, said the LVR restrictions are only part of ensuring the stability of the financial system.
âIt’s a tool in the toolbox, I mean our mortgage portfolio is stronger than it’s ever been. We have a very small portion of our book at over 80% LVR and even though the speed limit rate has been reduced to 10%, we haven’t written much over 10% anyway. “
Watson said that customers who take on high LVR loans need to be aware of what they are getting into and that they can certainly afford the repayments.
CoreLogic’s chief real estate economist Kelvin Davidson said that while LVRs are expected to come into effect, it’s the rising cost of mortgage payments that will have a bigger impact.
âTo date, LVR has probably been the biggest constraint on investors and will soon apply to owner-occupiers. So, probably thus far, they’ve certainly had the biggest influence.
“But from now on, mortgage rates are definitely a key consideration for everyone. I think they’re already probably rising faster than people might have thought a month or so ago.”