As a rule of thumb, home buyers need a minimum of 20% deposit to secure a mortgage from the bank. So if you’re looking to buy a $650,000 home, you’ll need a $130,000 deposit.
However, Banks can loan 15% of new mortgages to buyers with less than 20% deposit. There are criteria around that.
That’s because borrowers with a high LVR (loan to value ratio – how much you borrow as compared to the value of the home you want to buy) are considered a bit of
But from the 1st of January 2019, banks will be able to loan up to 20% of new mortgages to buyers with less than 20% deposit.
Good news.
So, what’s with the easing?
The Reserve Bank makes the rules here. Limits on high LVR’s have been in place since 2013.
The Reserve Bank says that while vulnerabilities persist, risks in NZ’s financial system have eased in recent times. Good to hear.
Investors get a break too.
Investors require a 35% deposit. Banks can, however, loan up to 5% of new mortgages to investors with less than that.
Restrictions are tighter for investors because loans are deemed higher risk.
But from the 1st of January 2019, banks will be able to loan to investors with less than 30% deposit (down from 35%).
So on the face of it, that’s great news for buyers and investors, and therefore sellers.
What remains to be seen, is whether the banks maintain their rigid lending criteria, which will have a bearing on how many buyers can actually take advantage of the LVR changes.
Sources:
- The Reserve Bank – Reserve Bank to ease loan-to-value ratio restrictions
- The NZ Herald – Easing of home lending restrictions good news for first-home buyers, Govt says