Yesterday, the Reserve Bank of New Zealand issued some far reaching new and adjusted LVR rules. What this means is that most Investors will now need a 40% deposit for new purchases and First Home Buyers have again been hit- with the 15% LVR rule being reduced back to 10% (it was already 10% in Auckland) thus limiting the pool of resources available to those with smaller deposits. The best way to explain this is, for example, say ANZ writes $100 million per month in loans, only $10 million of that will now be allocated to houses with less than a 20% deposit.
New houses remain exempt from these new rules, as do straight dollar for dollar re-finances.
These straight dollar for dollar re-finances could be very handy for anyone (Investors) reaching the end of the Interest Only terms of their loans. At present, the Banks are clamping down on rolling over Interest only periods so a re-finance for a fresh Interest Only term at a new Bank is something worth considering.
While these measures were not entirely unexpected, the speed is surprising considering it was only recently announced earlier this month that new restrictions could be anticipated to be in place by the end of the year. While the new rules are set to kick in on the 1st of September 2016, the Reserve Bank will be expecting the Banks to adhere to them straight away . The speed at which this is happening is most unfair as there will be many millions of dollars worth of loans in the systems as works- in-progress which may now be declined- many people having already spent their hard earned money on Valuations and Solicitors. Notice is needed to allow a funnel to be completed in a timely manner and the speed of this Reserve Bank action is certainly not something that one would consider best practice!
First Home Buyers should be completely exempt of the LVR rule as it is a space that the Government and Reserve Bank (although this is not technically their job) should be bolstering instead of hindering and restricting.
At the end of the day, young New Zealanders should always have the best chance to own a home , it remains the Kiwi dream and why not!
If you feel these measures will affect you in any way, shape or form, please do not hesitate to call the team at Tony Mounce Mortgages.