LVR changes and what do they mean for you?

by May 4, 2020Industry News, Mortgages


In 2013 the Reserve Bank introduced LVR restrictions to curb a potential overheating of the property market. As a rule, owner occupiers needed a 20% deposit and investors 40%, later reduced to 30%. There was some leeway with banks able to lend a very small amount with lower deposits.

What’s changed?


All restrictions have been removed which basically puts lending back to where it was prior to 2013. The Reserve Bank’s reasoning is based on stimulating home ownership whilst mitigating any potential fallout if property prices fall, which in our view is a remote possibility.

The Reserve Bank will review in 12 months, so expect some form of restriction coming back at that time.

For first home buyers, 10% deposit will become the new norm, albeit for quality applications only. The LVR changes do not make a marginal application any better. Banks will be cautious at high LVR as they are now and also have to abide by The Responsible Lending Code which is all around not putting customers at financial risk.

The real winners, in our opinion, are Property Investors. The 30% deposit requirement will reduce to 20%, as 80% loan to value (LVR) is a Lenders sweet spot. With 20% equity a customer is going to fight to keep their property in the event of hardship (or sell it!).  The Bank is at minimal risk in the event of a downturn. Those of us who remember the GFC, saw some suburbs in Auckland drop by 14% at worst and then rebound within two years.

Another reason for the decision is to protect Banks and Customers in the event of hardship, where the loan goes from under 80% to over. Under the previous restrictions, this could have caused regulatory issues, so the Reserve Bank have taken that risk away.

Will the flood gates open?

Just because you can do something doesn’t mean you will.

This applies to lending in a big way. All Lenders will be considering how to adapt to the new rules, but in the main they will simply revert to what was in place prior to 2013. In the current climate of Covid 19, we simply don’t know what the coming months will look like. Credit criteria will tighten, meaning more high LVR applications will be declined leaving more money available for quality applications. This includes property types too, so small apartments, tiny houses and bare land will see no change in lending.

Low equity premiums/fees?

These were already in place prior to 2013 and so we see no change here.

If you are borrowing over 80%, the risk to the Lender is higher and so they charge accordingly. These charges take two forms; one is a margin on the interest rate and the other is a one off fee.

New Build

No change here as these were exempt from the restrictions.

The Reserve Bank wanted to encourage new construction and promote higher quality living accommodation. For Property Investors 90% has always been possible for new build and for first home buyers 95%, subject to very strict criteria.

The net effect

Positive in our view.

For first home buyers who have demonstrated a good financial discipline, there will be more opportunity to get into the housing market.

For Property Investors lower deposits mean more purchases, which in turn gives renters greater choice. New Zealand is a free Country but we can’t live on the beach, so these changes will see property ownership increase, which in our view can only be a good thing.


As always we are happy to answer any questions. Email or call 0800 LENDER (536337)

Jeff Royle

Owner iLender Mortgages

About iLender

At iLender we put your best interests first and not the Bank – our advice is impartial as all Lenders who we do business with pay about the same in commissions.

Although we are Auckland based Mortgage Brokers, we help customers everywhere in New Zealand and overseas with buying property in New Zealand, as we are very much about online and giving advice here and now!

How to get a mortgage when you are Self-Employed

There’s a lot to be said for working for yourself. Whether you’re a freelancer, contractor, or small business owner, striking out on your own offers a sense of opportunity that’s hard to find in salaried roles. However, self-employment can make things tricky when it...

Government Housing policy changes – March 2021

Can they work or is there ‘an elephant in the room’? A lot of comment has been made around the Government’s changes to Residential Property Investment over the last few days, so I thought commentary from me, with nearly 30 years in Property Finance, might bring some...

What kind of loans can I get with bad credit?

A few financial slip-ups in the past can have a surprisingly big impact on your credit rating. A bad credit rating indicates that you may be a risky borrower, which can make it difficult to get the bank’s approval when the time comes to apply for a home loan....

LVR changes and what do they mean for you?

Background In 2013 the Reserve Bank introduced LVR restrictions to curb a potential overheating of the property market. As a rule, owner occupiers needed a 20% deposit and investors 40%, later reduced to 30%. There was some leeway with banks able to lend a very small...

Getting a home loan: What to do when the bank says “No”

It’s easy to feel discouraged when a bank rejects your home loan application, but it’s important that you do have other options when it comes to securing a mortgage. Non-bank lending can be an excellent option for home buyers who have had their mortgage applications...

Credit searches – What to know before you apply for a Mortgage or Loan

All Lenders use a credit search as part of their assessment of a Mortgage or Loan Application and there are some things that are important to know. Some Lenders use a credit scoring system, some don’t. Credit Scoring Mainstream lenders use a credit scoring system and...

More Reasons To Be Cheerful

Upturn in House Prices… A couple of the major Banks are predicting house prices to increase by up to 7 per cent next year with the property market due to "spring back to life". This is a welcomed announcement as it comes on the back of a fairly quiet winter - so signs...

Can I get a home loan with bad credit?

Getting a mortgage can be challenging if you have bad credit or no credit history. Banks tend to perceive you as more of a risk and are generally less inclined to approve your home loan application.  But that doesn’t mean it’s impossible to get a mortgage. Here at...

The truth about mortgages, interest rates, the housing market and everything else the media likes to sensationalise!

  'House prices down' 'First home buyers finding it impossible' 'Investors exiting the market' Such headlines are gross exaggerations and often blatant misrepresentations of the truth. The Housing Market This is flat, but stable. QV (NZ's leading provider of...

Is this a good time to buy?

Auckland mortgage brokers weigh in It’s no secret that the Auckland property market has slowed considerably in recent months. With sales volumes dropping, house prices showing little signs of growth and homes taking longer to sell, it’s little wonder that buyers are...

Best mortgage rates, 10% deposit owner occupied and 20% rental purchase, self employed with no financials and help for those with bad credit or arrears.

Hundreds of reviews on TradeMe and Google makes us your ‘Number 1’ choice.

Call 0800 536 337