ANZ New Zealand has upped the ante for residential property investors increasing the minimum deposit to 40 per cent.
The country's largest bank said the change would be effective immediately and was being undertaken to try and bring balance back to the housing market.
The bank brought back a 30 per cent investor deposit requirement in November after the Reserve Bank signalled it would be bringing back bank lending restrictions dropped in April to help cope with the Covid-19 crisis.
Ben Kelleher, ANZ managing director personal, said it would also be recommending to the Reserve Bank that the loan to value ratios for property investors be set to 60 per cent rather than the proposed 70 per cent.
"We've been closely monitoring the impact on residential property prices of historically low interest rates, reduced LVR requirements and existing issues with supply and demand," Kelleher said.
"Escalating property prices are putting home ownership out of reach for many Kiwis. The current settings favour property investors particularly over first home buyers, potentially locking a generation of New Zealanders out of home ownership.
Kelleher said it was in everyone's interests for residential property prices to be sustainable long term, and for home ownership to be accessible to as many people as possible.
"As New Zealand's largest home lender, decreasing the LVR on residential investor lending is one thing we can do to help bring balance to the residential property market."
The Reserve Bank opened consultation on bringing back loan to value ratio restrictions last week.
The central bank dropped loan to value ratio restrictions on April 30 in a bid to ensure there were no barriers to banks offering home loan deferrals amid the chaos caused by the Covid-19 pandemic.
But a faster than expected recovery in the economy and a strong run in the housing market has prompted the Reserve Bank to bring them back sooner with a plan to restart the restrictions on March 1.
House prices have risen more than 10 per cent in the last year despite New Zealand plunging into a recession brought on by the Covid-19 pandemic.
The situation has prompted Finance Minister Grant Robertson to write to Reserve Bank governor Adrian Orr asking him to take account of house prices when making its decisions.
The Reserve Bank has estimated house prices could fall 1 or 2 per cent if bank low deposit lending restrictions are reinstated by March.
Kelleher said ANZ had seen two record months of residential property lending with 32.4 per cent going to residential property investors and 18.3 per cent to first home buyers.
He said ANZ would longer term be guided by the outcomes of the RBNZ's consultation process early next year.
Submissions are open on the Reserve Bank consultation document until January 22 with a decision expected to be made in February.