Scrapping LVRs will make a huge difference

News that the Reserve Bank is proposing to remove its mortgage loan-to-value ratio (LVR) restrictions will mean young Kiwis can buy their first homes sooner with lower deposit requirements now inevitable, says Derryn Mayne, Owner of Century 21 New Zealand.

This morning the Reserve Bank announced over the next seven days it will consult on its proposal to scrap LVRs for at least a year. This comes in response to the economic downturn caused by the Covid-19 pandemic.

"This is actually long overdue. Let's not forget tough LVRs were introduced back in 2013 to cool the property market. Within a few years they'd had their desired effect, and the restrictions were subsequently softened. However, Century 21 has been among those in the industry calling for the wider need of LVRs to be reviewed. This proposal then is welcomed news," she says.

Ms Mayne says scrapping LVRs would be a timely boost for the real estate industry, as it simply provides more Kiwis the chance to get on the property ladder.

Deposits will still be required by banks, but they'll have greater flexibility to assess mortgage applications case by case. In recent years, she says, the rigid LVR restrictions have sadly forced many Kiwis to keep renting, and we've seen less 'mum and dad' property investors buying and overseeing the country's rental stock.

"Thankfully the days of requiring a 20% deposit from most owner-occupiers look set to be over. In Auckland, the LVR restrictions have meant you've likely needed to save a six-figure sum before the bank could even consider lending you money. Sadly, it created two tiers of young people – those whose families could financially help them into a house and those who couldn't.

"This will give every Kiwi a fairer crack at getting into the housing market. What's more, with record-low interest rates locked in and fairer prices inevitable, it's set to be an attractive buyers' market," says Derryn Mayne.

Derryn Mayne – Century 21 New Zealand owner - (021) 399-431

Disclaimer: The opinions posted within this blog are those of the writer and do not necessarily reflect the views of CENTURY 21 New Zealand, others employed by CENTURY 21 New Zealand or the organisations with which the network is affiliated. The author takes full responsibility for his opinions and does not hold CENTURY 21 or any third party responsible for anything in the posted content. The author freely admits that his views may not be the same as those of his colleagues, or third parties associated with the CENTURY 21 New Zealand network.