PM wants limits on low-deposit home loans not to hurt those who need most help.

Prime Minister John Key was adamant yesterday the Reserve Bank and retail banks could find a way to exempt first-home buyers from proposed restrictions on low-deposit home loans.

At his post-Cabinet press conference, Mr Key said he supported the move by the Reserve Bank that would see banks limit how much of its new mortgage lending could be made on high loan-to-value ratios (LVRs).

He indicated any measures negotiated would be unacceptable if they penalised first-home buyers at the expense of speculators and property investors.

"Yes I accept absolutely and endorse the view that the banks should be forced to use this as a legitimate tool.


"I don't think it should be a tool that is used to write high LVR ratios for a bunch of rich people, and lock out a whole lot of first-home buyers."

Mr Key said he had spoken to Reserve Bank Governor Graeme Wheeler about it last week and that it was "a work in progress".

He said Mr Wheeler was sympathetic to his feelings on the matter but there were challenges.

"But in the end I just don't think it is as challenging as everybody says. If there's a will there's a way.

"I'm not saying it's going to be perfect or there won't be some implications but for the most part we want those first-home buyers to get a chance to buy a home."

The Government has a dual problem: how to tackle a rising Auckland property market that is making housing unaffordable to first-home buyers, without using measures that make it even more unaffordable to first-home buyers by requiring even higher deposits.

Mr Wheeler indicated last week he would be talking with banks in July and making firm decisions in August about the LVRs.

Mr Key said that when banks came to implement the LVRs under new lending they would know exactly who their customers were, their assets and their income capacity. The loans to first-home buyers would be less than those for people buying second or third properties.


"So you can't tell me that the trading banks can't work with the Reserve Bank and make sure that those people are better looked after."