LVR review well overdue for Akld first-home buyers
“For the sake of tens of thousands of potential first-home buyers in Auckland, it’s time for the Reserve Bank to formally review its six-year-old policy on loan-to-value ratios (LVRs),” says Ryan Mitchell, National Manager of Century 21 New Zealand.
The real estate boss’s call follows recent industry data which confirms Auckland’s slowdown both in the number of sales and prices reached. It also follows the Reserve Bank cutting the Official Cash Rate to a record low, with many banks now offering once-in-a-lifetime interest rates.
“The blanket high deposit requirements are sadly and simply keeping too many first-home buyers out of the housing market. It’s actually cruel that so many are denied the opportunity of home ownership during a time of record low interest rates and steadying prices because of this outdated and unnecessary measure,” says Mr Mitchell.
“I appreciate the Reserve Bank is committed to an ongoing appraisal of the situation. However, the time for a formal and specific review has arrived. It’s abundantly clear that the tough LVRs are no longer needed. In fact, in Auckland they’re now counter-productive!”
The stringent LVR policy was introduced as a ‘temporary’ measure back in 2013 to help manage what was a crazy Auckland property market, with new home builds exempt from the lending restrictions. Six years on and it’s generally agreed that the LVR policy has had its desired effect.
“There has been some tweaking at the edges but much more now needs to be done. It’s time the policy reflected the 2019 market, not the 2013 one.”
Since 1 January banks have been allowed to lend 20% (increased from 15%) of their new loans to owner-occupiers with a deposit of less than 20%.
Mr Mitchell says the latest adjustment by the Reserve Bank achieved a fairly muted market response, with little sign of more Kiwis rushing to take out home loans despite some of the lowest interest rates in over 50 years.
“That’s a crying shame and a lost opportunity for so many who should be buying their first home. Many couples could easily service a mortgage but struggle to come with a 20% deposit, not helped by high rents and living costs. In many cases the required deposit in Auckland is at least $200,000! That’s a huge barrier to entry,” he says.
“Of course, first-home buyers should always be required to stump up a decent deposit. However, them also getting a fair go is now well overdue,” says Mr Mitchell.