Tauranga property experts are hopeful LVRs will be scrapped by the Reserve Bank of New Zealand. Photo / File
Tauranga property experts are hopeful LVRs will be scrapped by the Reserve Bank of New Zealand. Photo / File
Bay property experts are hopeful the Reserve Bank will scrap loan-to-value ratio restrictions to help stimulate the housing market.
Deputy Governor and general manager of financial stability Geoff Bascand announced the proposal last week in response to the economic downturn caused by Covid-19.
Bascand said it was one of themacro-prudential tools the bank had to respond to cyclical pressures and if it was given the greenlight LVRs could be gone for at least 12 months.
Bayleys and Eves Realty Waikato/Bay of Plenty/Taranaki chief executive Heath Young. Photo / File
Bayleys and Eves Realty Waikato/Bay of Plenty/Taranaki chief executive Heath Young said the shift in direction ''can only be interpreted as a positive move''.
First home buyers and those looking to upgrade from one property to their next will benefit the most, he said.
''Banks will still apply their typical credit criteria however a move from 20 per cent to 10 per cent required for a home deposit is significant and will definitely assist in stimulating the market.''
Young said the Tauranga market was tracking very well in terms of volume and pricing heading into lockdown but it was too early to be making calls on pricing.
''The property market has effectively been put into a holding pattern for a month and the coming months will provide a clearer read on what's happening once the extent of the economic impact is known.''
General manager of Tremains Bay of Plenty and Waikato, Anton Jones. Photo / File
General manager of Tremains Bay of Plenty and Waikato, Anton Jones, said it was good the Reserve Bank had come forward with the proposal.
''But obviously we want to be careful. We don't want to go towards the silly debt levels of pre-GFC because we don't want to go back and do that again.''
However, Jones said he expected quite a bit of activity early on because there would be people who needed to buy and sell.
But how long that would last was the biggest uncertainty although historically low-interest rates were also helpful, he said.
OneRoof editor Owen Vaughan said he supported the move to scrap LVR restrictions which would be ''a bold and necessary'' to provide certainty to a wide range of buyers and sellers.
''It will mean those people who are financially secure and are in a position to buy can do so with added certainty. And that's going to provide a big boost to the market.''
OneRoof editor Owen Vaughan. Photo / File
But it would not create a free-for-all as ''banks aren't going to be suddenly handing out mortgages with a 5 per cent deposit''.
''They're still going to be prudent ... and access candidates for mortgages, on their ability to repay that loan.''
Majesty Mortgage Brokers Tauranga director Luke Turner said a smaller deposit would help first home buyers and investors.
The 20 per cent benchmark set by some banks was not really realistic for most first-home buyers.
However, banks would most probably be looking closely at employment and how people could service a mortgage, he said.
''So if you've got good affordability and good employment that will probably be a major thing. The tourism industry and the retail are likely to get hit the hardest so the banks will probably be more cautious in regards to those industries.''
Kiwibank external communications manager Kara Tait said the bank was supportive of the proposed change from the Reserve Bank which would provide more flexibility when assisting customers who had been impacted by Covid-19 and have taken up home loan repayment deferrals.
But it was important people were also aware of potential price volatility in this market and how that can impact their equity.
''Our focus is ensuring customers can afford their proposed lending. This remains key under any environment.''
ANZ external communications corporate affairs manager Stefan Herrick said it also welcomed initiatives by the Reserve Bank to strengthen the financial system and help New Zealanders impacted by Covid-19.
''We support the consultation process over temporarily removing LVR restrictions on home loans and look forward to discussing the matter with the Reserve Bank over the next few days.''
A Westpac NZ spokesman said it was considering what the proposal means for the bank ''and our customers, and will look at providing feedback to the Reserve Bank as part of the consultation''.
Its Family Springboard product allows first home buyers' families to contribute by using their own home as security on the loan.
* The NZRB is consulting on its LVR restriction proposal. Feedback opened on April 21 and closes on April 28.
