Loan-to-value restrictions unchanged as house prices stay flat and lending remains moderate
Mortgage advisers can expect no change to deposit requirements for clients in the months ahead, after the Reserve Bank's Financial Policy Committee decided to hold loan-to-value ratio settings steady following its annual macroprudential policy review.
Taken together with unchanged debt-to-income rules, the decision means borrowing capacity constraints for both first-home buyers and property investors will hold steady, at least in the near term.
Current settings unchanged
Banks will continue operating under the LVR settings introduced last December: up to 25% of new owner-occupier lending can go to borrowers with an LVR above 80%, while up to 10% of new investor lending can exceed 70% LVR. Debt-to-income restrictions, which cap how much banks can lend relative to a borrower's income, also remain unchanged.
Assistant governor for financial stability Angus McGregor (pictured) said the committee's review considered house price trends, the risk profile of recent lending, financial strain among existing borrowers, and the resilience of the banking sector before reaching its decision.
"Housing risks are currently contained," McGregor said. "Nationally, house prices have remained broadly flat in recent years, while mortgage lending growth has been modest and the share of higher-risk lending remains manageable."
McGregor added that the review process itself is a routine part of the Reserve Bank's approach to financial stability.
"We review settings annually to ensure they remain appropriate given housing market conditions and financial stability risks. This forms part of the macroprudential policy framework published earlier this year," he said.
DTI rules remain a key guardrail
Beyond the LVR settings, McGregor pointed to debt-to-income restrictions as playing a complementary role in managing risk across the lending system.
"These complement LVR restrictions and are an important guardrail against the build-up of high-risk lending, particularly during periods of low interest rates and strong housing demand," he said.
The Reserve Bank said it will keep monitoring developments in house prices, mortgage lending, and broader financial stability risk, with the next scheduled review of macroprudential settings expected in around 12 months. However, the central bank left open the possibility of moving sooner, noting the review could be brought forward "if conditions warrant."
See the RBNZ announcement here.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
