Help for home buyers welcomed

Finance Minister Nicola Willis has welcomed changes to bank lending rules that will make it easier for people with smaller deposits to buy their first homes.

The Reserve Bank has confirmed it will increase the proportion of low-deposit lending commercial banks are allowed to provide, easing Loan-to-Value Ratio (LVR) restrictions from next month.

“The easing of the Reserve Bank’s Loan-to-Value Ratio restrictions will help more young families to achieve the Kiwi dream of owning their own homes,” Willis said.

At present, banks can allocate up to 20 percent of new home loan lending to owner-occupiers with deposits of less than 20 percent. From 1 December, that limit will rise to 25 percent.

“This means more opportunities for people to get a foot on the property ladder,” Willis said.

“Typically, about 80 percent of those with deposits of less than 20 percent are first-home buyers who are currently taking advantage of lower prices and lower mortgage rates.

“Cotality reported that in the three months to September, first-home buyers accounted for a record 27.7 percent of property purchases nationwide.”

The Reserve Bank has also increased the share of loans banks can make to property investors with deposits below 30 percent, lifting the cap from 5 to 10 percent.

Willis said the changes follow the introduction of debt-to-income (DTI) restrictions last year.

“The Reserve Bank’s view is that the DTI restrictions increase the resilience of the banking system and means LVR restrictions can be eased.”