An Auckland mortgage broker says lending restrictions are making it "impossible" to get bridging finance through banks, making it harder for people to move houses.

Bridging finance is typically used to fund a higher amount of debt for a short time when someone buys a house before selling their own home.

But John Bolton, chief executive of Squirrel Mortgages, said the combination of loan to value ratios, tightened lending by New Zealand banks because of Australian regulations, overseas income restrictions and bank capital requirements, was making it harder for people to buy and sell houses.

"I'm dealing with second home owners who want to buy property before selling their one and don't want to be pressured into selling their house.


"That is becoming impossible because banks won't bridge."

Bolton said there was a shortage of good properties on the market at the moment in Auckland and people who couldn't sell quickly were taking their property off the market rather than taking a lower price.

He knew one agent who had five listings pulled in the last few weeks.

"It has just created a massive amount of illiquidity.

"It is not like there is an excess amount of property in Auckland."

He said one client wanted to trade up before selling his home but couldn't get the finance to do so despite having a lot of equity, a good income and being the chief executive of a company.

In another deal a couple wanted to buy a second house and rent it out while they did up their own property and sold it, but banks were not keen to lend them the money.

Bolton said the Reserve Bank had tightened loan to value ratios to the point where it was stopping people from doing day-to-day transactions.

"It is not just investors buying their seventh property being affected," he said.

"We are seeing a lot more collateral damage and will see a lot more over the next six months as a result of the heavy-handed approach," Bolton predicted.

Prime Minister Bill English yesterday hinted that the Reserve Bank should consider removing restrictions on mortgage lending.

English said there had been a "correction" in the New Zealand housing market, and that "raised the question of how long [the restrictions] would be there for".

"It's important that the people who put them in place have thought through the conditions under which they removed the LVRs.

"Because ideally, they are not a permanent feature of the market."

But he said that the loan-to-value (LVR) rules, which restrict how much can be leant to people with a deposit of less than 20 per cent, were a matter for the Reserve Bank.

The real estate industry has called for a relaxation of the LVR rules after house sales in Auckland fell by a quarter in the last year.

Barfoot and Thompson wants entry-level buyers to be exempted from the lending restrictions as long as properties are below a $600,000 threshold.

Bolton said he would like to see the restrictions eased to drop the deposit or equity requirement from 20 per cent to 15 per cent.

But he said the LVRs shouldn't be viewed in isolation as many of the other changes had been just as significant in restricting the market.

He said there hadn't been a lot of discussion around how to back out of the LVR clamp-down.

"You would expect them to at least communicate what a graduated change might look like, because nobody knows.

"How much of a reduction in sales price/volumes do they consider to be too much?

"This isn't a market correction, this is a policy-induced market change. This is entirely driven by policy."

But the Reserve Bank's Official Cash Rate statement last week reiterated its housing market concerns.

"House price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints and a tightening in credit conditions," the bank said.

"This moderation is expected to persist, although there remains a risk of resurgence in prices given continued strong population growth and resource constraints in the construction sector."