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Proposed new LVR rules for investors

AUTHOR: The Professional Trustee Team

POSTED: 19 July 2016

From 1 September 2016 we are likely to see higher LVR rules being applied to investors who are borrowing to purchase residential investment property as per the Reserve Bank announcement today.

Under the proposed new LVR restrictions, investors across New Zealand will be required to have loan-tovalue-ratios of 60% (i.e. they will need deposits of 40%). Only 5% of residential investment loans will be allowed to have LVRs greater than 60%. Debt-to-income (DTI) ratios could also be applied from 2017.

Reviewing data overseas it seems LVR restrictions do slow down credit consumption and house price growth at the time of being introduced. However, long-term they do not appear to decrease prices.

Higher LVRs could now pave the way for a decrease in the OCR, which may possibly lead to a decrease in short term interest rates, assuming the banks pass same on to borrowers. Our dollar may also continue to fall as it did this morning after the announcement. One hopes inflation will consequently lift.

Understandably this new policy level will affect existing investors and people currently in the process of purchasing property. If assistance is needed, please contact us at GRA.

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The Professional Trustee Team

09 522-7955

[email protected]

© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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