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Finance Minister Nicola Willis has welcomed plans by the Reserve Bank to relax mortgage lending restrictions, saying the move will help more New Zealanders achieve the dream of owning their first home.
The Reserve Bank announced today, October 14, it is consulting with commercial banks on proposals to ease loan-to-value ratio (LVR) limits from 1 December, potentially freeing up lending for both first-home buyers and residential property investors.
Under current rules, only 20 percent of new loans made to owner-occupiers can go to buyers with deposits smaller than 20 percent of a property’s value. The Reserve Bank is proposing to lift that cap to 25 percent.
Willis said the change would make a tangible difference for those trying to get onto the property ladder.
“Home ownership is part of the Kiwi dream,” she said.
“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder.”
The Reserve Bank is also proposing to double the amount banks can lend to investors with deposits of less than 30 percent — from 5 to 10 percent of new lending.
According to the bank, the easing of LVR limits follows the introduction of debt-to-income (DTI) restrictions last year, which it believes have strengthened the resilience of the financial system and allowed scope for a more flexible approach to lending.
Willis said she supported the bank’s cautious but forward-looking stance.
“The Reserve Bank’s view is that the introduction of DTI restrictions increases the resilience of the banking system and means LVR restrictions can now be eased,” she said.
“I look forward to hearing the outcome of the Reserve Bank’s consultation with the commercial banks.”
If the proposal proceeds after consultation, the changes would take effect on 1 December 2025.
