LVR restrictions have been lifted

As Kiwis settle into Alert Level One and buyers return to the market, the removal of mortgage loan-to-value (LVR) restrictions to could impact your borrowing power and your deposit needs.

What are LVR restrictions?

An LVR is a measure of how much can be borrowed against a mortgaged property, compared to the property’s value.

A borrower with an LVR above 80% (with a deposit of less than 20% of the property value) is considered to be stretched. So, the Reserve Bank introduced restrictions to limit the number of high-LVR loans a lender can make.

The restrictions aimed to protect borrowers and strengthen the financial system when house prices were rising and interest rates were falling.

Why have they been removed?

Experts say that temporarily lifting LVR restrictions will bolster the lending market and encourage the flow of credit through the economy.

The change also means that lenders may be able to better support borrowers who need to defer mortgage payments or who use their home equity to keep their businesses going.

How will this affect me?

If you are applying for a home loan, the change could affect your application assessment. Depending on your circumstances, it might help you get into the market with a smaller deposit.

However, it is still up to each lender to establish its own set of lending practices and policies.

To find out more or to discuss your options, contact your local Mike Pero Mortgage Adviser today.