Monthly RBNZ: Changes to loan-to-value ratio (LVR)

In the Reserve Bank of New Zealand`s (RBNZ) financial stability report, the central bank has proposed changes to the loan-to-value ratio (LVR) policy. The new policy will take place effective from 1 October. 

The new changes are:

• Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.

• Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.

• Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

It is interesting to note in one of the systematic risks identified, Auckland`s median house price is 60% above its 2008 level. This sounds like a bubble to me and the central bank is being proactive when it comes to mitigating the risk of one. 

The full report can be found here while Governor Wheeler`s press conference can be viewed here.