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Reserve Bank news a boost for summer real estate

News that the Reserve Bank is further relaxing its tough lending rules is a boost for New Zealand’s real estate market going into summer, says Ryan Mitchell, National Manager of Century 21 New Zealand.

“The tough LVRs were introduced back in 2013 to cool the property market and they’ve since had their desired effect. Reviewing and relaxing the lending restrictions is something many in the industry, including the Real Estate Institute (REINZ) and Century 21 New Zealand, have been calling for over the past year,” he says.

“We’ve all been waiting with bated breath as the Reserve Bank has again been considering the loan to value ratio rules, with the first round of LVR relaxation earlier this year proving to be successful. Today’s announcement that there’ll be further softening of the rigid deposit requirements will be welcomed particularly by first-home buyers.”

Mr Mitchell says with the property market particularly in Auckland successfully stabilising over the past 18 months, the blanket high deposit requirements were starting to unnecessarily keep too many first-home buyers out of the housing market. Those borrowing to build a new dwelling mostly remain exempt from the LVR rules.

“While this second tweaking of the LVR rules by the Reserve Bank is positive, let’s not forget household debt remains high and so I think it’s safe to assume the banks will keep a tight rein on their credit conditions overall.”

As part of its Financial Stability Report, the Reserve Bank has today announced that from 1 January New Zealand banks will be allowed to lend 20% of their new loans to owner-occupiers with a deposit of less than 20%. This follows the Reserve Bank lifting that allowance earlier this year from 10% to 15%. Rules have also softened for property investors.

“Maximum lending for most owner-occupiers remains at 80% of a property’s total value. However, there will now be more exceptions made within a bank’s new residential mortgages portfolio which is great news for many prospective home buyers.

“Even if high-LVR borrowers can successfully secure a mortgage with a 15% deposit rather than the standard 20% requirement, that can be tens of thousands of dollars difference and a real gamechanger - enabling more to get into the housing market.

“Going into this summer Century 21 is focused, energised and optimistic. The New Zealand real estate market is holding up well, some interest rates are the lowest in 70 years, and the public is responding positively to Century 21’s new branding and messaging which is currently being unveiled around the country,” says Ryan Mitchell.

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