The incessant hum of LVR restrictions and other macro-prudential tools to curtail the seemingly out-of-control Auckland housing market by the Wheeler led RBNZ is crescendoing into a full-blown chorus set to underscore lending ethos in the low equity market.
From 1st October onwards, banks are required to have no more than 10% of mortgage lending flows at LVRs of more than 80%. Translation – if you have less than 20% deposit to put down for a house then chances are, more people are going to start saying no to you. The rationale? To slow the Auckland market tempo by excluding those who are or expect to be highly-leveraged.
It is worth noting at this point that the Reserve Bank is imposing a speed limit, not a roadblock. Banks are not being stopped from doing business with high LVR borrowers. They are simply being asked to exercise prudence and foresight in a market that is increasingly being fuelled by debt.
Information pertaining to the application and the monitoring of the new speed limit is still sketchy. Frequent reminders for borrowers to ‘check with [their] bank[s]’ litter the latest RBNZ published guide for borrowers. Apart from an indication that it is looking to harmonise the disparate rules of calculating loan value (as purely mortgage or inclusive of personal credit cards and other loans), the Reserve Bank’s language thus far suggest that while it expects decision makers of the financial market to ‘operate within the spirit of the new regime’, it is not yet prepared to intervene on a day-to-day operational level....
