(24 August 2015 – New Zealand) The Reserve Bank of New Zealand (RBNZ) published a summary of submissions and final policy positions regarding the changes to the Loan to Value Ratio restriction rules (LVRs) on 21 August as well as the asset classification of residential property investment loans in the Capital Adequacy Framework.
In May the central bank altered existing LVR rules to focus on rental property investors particularly in the Auckland region where prices continued to surge.
The alterations meant that borrowers would need a 30 percent deposit for a mortgage loan secured against an Auckland rental property.
The new rules become effective on 1 November 2015, one month later than initially proposed to enable banks to adapt their systems for the new rules.
Restrictions on loans to owner occupiers in Auckland will continue to apply, with banks allowed to make up to 10 percent of their new mortgage lending to such borrowers with LVRs exceeding 80 percent.
Restrictions outside Auckland are being eased after 1 November.
Banks will be able to make up to 15 percent of their new mortgage lending to borrowers with LVRs exceeding 80 percent, regardless of whether the borrowers are owner occupiers or residential property investors.
The RBNZ received feedback via written submissions, and through meetings and workshops with affected banks.
The Reserve Bank has modified its proposals in response to feedback about compliance challenges and special cases.
The final policy position adopts a 5 percent speed limit for high-LVR loans to Auckland investors, instead of 2 percent as originally proposed.
On top of this the RBNZ is also introducing an exemption for high LVR lending to finance leaky building remediation and similar cases.