There have been some significant changes in the lending market over the last few months, driven largely by the concerns for unsustainable and continued escalation in property prices. The Reserve Bank introduced further regulatory controls across the lenders restricting the available lending to borrowers particularly with regards to the purchasing of investment or rental properties. These controls are known as LVR (Loan to Value Ratio) speed limits. Whilst the Reserve Bank announced an effective date for these changes, the banks were asked to implement the changes as soon as possible, and in fact, the bank’s made the changes immediately.
Essentially, the new LVR rules mean that available lending on a rental or investment property is now restricted to 60% of the property’s purchase price or value. Borrowers can continue to seek up to 80% lending against their owner occupied property.
Potential way around new rules
What many don’t know is that if they have an owner-occupied property with equity (which many will have given the current market) they may be able to borrow more against this and a rental to achieve a higher LVR overall. The banks are being ambiguous at this stage on what we can do here but they are seeking advice from the RBNZ.
In addition to the LVR speed limits, the banks have also imposed considerable tightening of policy for borrowers who are relying on incomes generated from overseas, and each bank’s criteria is subtly different, but opportunities for those with NZ residency and citizenship status are still very much available.
Good news for borrowers
The good news is that the Official Cash Rate was lowered by 0.25% and while most of this saving was retained by the banks, there was still some benefit passed onto those with a floating mortgage, and clearly signaled that rates were to remain low for the foreseeable future.
The banks have money to lend but are being more measured in who they will lend to. In order to not only get approved but also a competitive deal, you need to present your application for a home loan in the best possible light - this is where a good Mortgage Adviser is worth their weight in gold. They can offer guidance around the LVR rule changes and also ensure your loan is structured appropriately to make the most of the rates available and your financial circumstances and objectives.
We have team of eight experienced and friendly Mortgage Advisers waiting to assist, so contact us if you would like some help.
About the AuthorName: Jon O’Connor
Jon is the General Manager of Rothbury Life & Morgages, a nationwide life insurance and mortgage advisory operation for Rothbury Insurance Brokers