Loan To Value Ratios May Be About To Change !
There has been many whispers recently with regards to Loan to Value Ratios and the likely hood of them changing…below is an excellent article which is worth a read
Prime Minister Bill English has ruled out allowing the Reserve Bank to introduce further curbs to home lending, and has signalled it should have a plan to remove a key lending restriction already in place.
The central bank has come under fire recently from real estate agents saying its loan to value ratio rules (LVRs) are squeezing buyers out of the housing market even as prices flatten and in some case fall.
The Real Estate Institute of New Zealand (REINZ) has called for a review of LVRs for first-home buyers, who must have a 20 per cent deposit.
Real Estate Institute chief executive Bindi Norwell has said tightening lending criteria from cautious banks and the LVR restrictions were impeding the market.
"The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake," she said.
But the bank has also asked the Government for the power to impose further limits on mortgage ending in the shape of debt to income ratios (DTIs), which would restrict borrowing for homes by tying debt levels to the income of borrowers
Speaking to reporters on Tuesday, English sent a clear signal to the independent bank that it should be considering how to end LVRs.
"In my meetings with them I have said ... I would expect them to work through what the conditions would be, but it's their decision," English said.
"If you bring something in as a temporary measure, then they should be clear about what's involved in removing them. They were always meant to be temporary measures."
However, he did not want to give the public the impression that politicians could tell the bank what to do.
With the housing market flat and in some places falling, some real estate agents were saying that because of the election the normally quiet winter period was being prolonged.
English said prices that had been rising by 15 per cent were now flat.
But he explicitly ruled out giving the bank the added tool of DTIs, which it had requested earlier in the year.
"We don't see the need for the further tools, those are being examined. If there was a need for it then we're open to it, but we don't see the need now. We won't be looking at it before the election."
Meanwhile, Labour leader Jacinda Ardern said she would like to see LVRs removed but would not interfere with the Reserve Bank's right to decide.
"We'd like to see them gone but we are not going to remove the independence of the governor of the Reserve Bank."
She said she had heard plenty of personal stories about people struggling because of LVRs.
'We've never favoured them, but we're also clear they have been introduced by the Reserve Bank because not enough had been done by the Government to end the pressure on the housing market."