MNI BRIEF: RBNZ To Adjust LVR Settings

The Reserve Bank of New Zealand will ease mortgage loan-to-value ratio (LVR) restrictions from Dec 1, increasing the share of new lending allowed at higher LVRs, the central bank said in a statement Tuesday. 

For owner-occupiers, the limit on loans with an LVR above 80% will rise to 25% from 20%, while for investors, the limit on loans with an LVR above 70% will increase to 10% from 5%.

Acting Assistant Governor for Financial Stability Angus McGregor said the adjustments follow a review of the RBNZ’s approach to setting LVR restrictions.

“We concluded that the introduction of debt-to-income (DTI) restrictions last year means LVR settings can be less restrictive on average. This includes looser default settings that we expect will be in place most of the time, except when risks are particularly elevated,” McGregor said.

The RBNZ will consult with banks over the next two weeks on proposed changes to their Conditions of Registration. From next year, responsibility for reviewing LVR and DTI settings will shift to the new Financial Policy Committee, which will review them at least annually and adjust as needed if financial stability risks rise.