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High LVR lending slips to 6.5% of new mortgages in July

High LVR lending slips to 6.5% of new mortgages in July, RBNZ data shows

By Jonathan Underhill

Aug. 26 (BusinessDesk) - The proportion of home lending with deposits of less than a fifth of a property's value fell in July amid growing evidence mortgage restrictions imposed by the Reserve Bank last year are succeeding in cooling house prices, especially for cheaper properties.

High loan-to-value lending by banks, those at a loan-to-value ratio of 80 percent or more, fell to 6.5 percent of total new mortgages in July from 6.7 percent the previous month. The ratio of high-LVR lending was 25 percent last September, a month before the Reserve Bank imposed a limit of 10 percent of total home loans, though it has rebounded from as low as 3.6 percent in January and March this year.

"The RBNZ has indicated the effects of these restrictions on the housing market have been greater than it initially estimated," said Christina Leung, economist at ASB Bank. "House price inflation peaked late last year, and we expect further moderation over the coming year as new housing supply comes on board and higher interest rates take effect."

Leung said there is potential for the proportion of new high LVR lending to edge higher as banks adjust to the limits and competition increases in the mortgage market.

(BusinessDesk)

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