The Reserve Bank of New Zealand (RBNZ) has made changes regarding lending for mortgages.
So, the RBNZ is the bank that helps keep the country's economy stable, and they have rules for banks when it comes to giving out loans for buying houses. One of these rules is called the loan-to-value ratio, or LVR for short. It's like a speed limit for banks—it tells them how much low-deposit lending they can do.
Now, the RBNZ has said that starting from June 1st, the restrictions on low equity mortgage lending will be loosened. What does that mean? Well, it means that banks will be allowed to give out more loans to people who have less money for a deposit on a house!
Currently, there are limits on how much banks can lend based on the LVR. For example, if you want to buy a house to live in, and your deposit is less than 20% of the house price, the bank can only lend a certain amount. But from June 1st, the limits will change. Banks will be able to give out more loans to people who have a deposit of less than 20%.
For those of you interested in investing in properties, there are also changes. Right now, banks can only lend a certain amount if you have a smaller deposit for an investment property. But starting from June 1st, banks will be able to lend more to investors with a smaller deposit.
Why is the RBNZ doing this? Well, they believe that the risks to the financial system from high-LVR lending have decreased. In simpler terms, they think it's now safer for banks to give out these kinds of loans without causing big problems.
It's important to remember that these restrictions were put in place back in November 2021 when there were higher risks. They helped make the financial system stronger, and we've seen house prices go down since then without major issues.
So, that's the gist of it! The RBNZ is making it a bit easier for banks to lend money for houses with smaller deposits. This might affect the housing market, so it's something to keep an eye on. If you have any questions, feel free to an expert mortgage advisor here or below!