The share of new mortgage lending going to borrowers with low deposits halved in October, the first month in which the Reserve Bank's curbs on such loans applied.

Of the $4.47 billion of new mortgage lending last month 12.8 per cent was at a loan-to-value ratio (LVR) of more than 80 per cent, down from 25.5 per cent of the $4.7 billion lent in September.

Earlier in the year high LVR loans represented around 30 per cent of new lending, Reserve Bank deputy governor Grant Spencer said.

Of the $571 million of high LVR loans made last month $53 million was to borrowers exempt from the restrictions, such as those guaranteed under Housing New Zealand's Welcome Home Loans scheme.


Excluding them, high LVR loans represented 11.7 per cent of new lending, close to the Bank's "speed limit'' of 10 per cent, with which the banks have to comply on average over the six months to March next year.

Lending at LVRs below the speed limit increased to $3.9 billion last month from $3.5 billion in September and $3.2 billion in August.

Spencer said the October result showed that banks were adjusting to the new policy and were well placed to meet the speed limit.

"While there has been a significant reduction in high LVR lending already, it is too early to assess what impact this is having on aggregate housing market activity and credit growth,'' he said.

"The banks are having to manage a pipeline of loans that were pre-approved prior to the LVR restrictions taking effect. The share of high-LVR lending is expected to fall further over the coming months as these pre-approvals run down.''

The curbs are intended to help reduce the risks of a sharp correction in house prices in an already overvalued housing market, Spencer said.

"Such a correction could be damaging for the financial sector and broader economy.''