LVR rules slowed price rises

File photo / APN
File photo / APN

Mortgage-lending rules introduced last October appear to have helped slow the speed of rising house prices, the Reserve Bank said yesterday.

The Reserve Bank introduced a policy last year restricting the amount of lending banks can extend to buyers with deposits of less than 20 per cent.

In September last year, before the restrictions came into play, high loan-to-value ratio (LVR) lending made up 25 per cent of all mortgage lending, the bank said.

But during the first six months the rules were in force, high-LVR loans made up only 5.6 per cent of lending on average.

High-LVR loans are those where someone borrows more than 80 per cent of the value of the property being mortgaged.

"Our initial assessment is that restrictions on high-LVR lending helped reduce house price inflation," said the Reserve Bank's deputy governor, Grant Spencer.

"A more in-depth assessment of the policy and its impact on the housing market will be included in next month's Financial Stability Report."

- NZ Herald

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