The Reserve Bank is consulting on the possible removal of loan-to-value-ratio (LVR) restrictions on mortgages to help New Zealand's economy recover from Covid-19.
An LVR is a measure of how much a bank can lend against a mortgaged property, compared with the value of that property.
Banks are currently permitted to make no more than 20 per cent of their residential mortgage lending to high-LVR (less than 20 per cent deposit) borrowers who are owner occupiers.
They are also currently only permitted to make five per cent of of their residential mortgage lending to high-LVR (less than 30 per cent deposit) borrowers who are investors.
Reserve Bank Deputy Governor Geoff Bascand said this morning that "LVRs were introduced as a macro-prudential financial stability tool in October 2013 and have been adjusted over time.
The move comes as the negative economic implications for the coronavirus outbreak intensify. (Source: Other)
"Adjusting the use and calibration of macro-prudential tools in response to economic conditions is how they are intended to be used."
Mr Bascand said the removal of LVRs would help banks to keep lending and to support customers, including with mortgage deferrals.
Consultation on the proposed change is now open for seven days, with feedback from key stakeholders being collected, and a decision will be made shortly afterwards.
If LVRs are removed, the Reserve Bank says it will monitor lending over the next 12 months as the economic impact of Covid-19 becomes clearer, and then re-assess whether to reinstate LVRs.
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