LVR restrictions at a glance

Restrictions on loan-to-value ratios (LVRs) are limits on banks to reduce the amount of low-deposit mortgage lending. Prudent lending standards are important for the long-term health of the banking system and the economy.

Most owner-occupiers need a 20% deposit to secure a property. From 1 November 2021 lenders can provide a maximum of 10% of new mortgage lending to owner-occupiers at LVRs greater than 80 percent (those with less than a 20% deposit).

LVR investors May 2021

Most investors need a 40% deposit to secure a property. Lenders can provide a maximum of 5% of new mortgage lending to investors at LVRs greater than 60% (those with less than a 40% deposit).

Investor loans – 40% deposit / 5% limit for high LVR loans

LVR lending restrictions are tighter for loans secured by investment property, in response to the growing housing market risks in that area. High-LVR loans in this category are those loans that are more than 60% of the property’s value (40% deposit). High-LVR loans can make up no more than 5% of a bank’s total new lending in this category.

Owner-occupier loans – 20% deposit / 10% limit for high LVR loans

This is borrowing secured with a mortgage against residential properties that the borrower lives in or uses as a holiday house. High-LVR loans are defined as those loans that are more than 80% of the property’s value (20% deposit). From 1 November 2021 high-LVR loans can make up no more than 10% of a bank’s total new lending in this category.

Some exemptions (including the following) apply:

New building exemption

Loans to people building a new residence are exempt. The borrower must either commit to the purchase at an early stage of construction, or be buying the residence (within six months of completion) from the developer. The exemption applies for both owner-occupiers and residential property investors. The LVR rules do not prescribe the size of a deposit for new residences.

Remediation exemption

Loans are exempt if used for remediation (e.g. weather-tightness issues), to bring a residence up to new building codes, or to comply with new rental property standards (for example, insulation). The exemption applies for both owner-occupiers and residential property investors.

Kāinga Ora First Home Loans

Low-deposit borrowers using the Kāinga Ora First Home Loan scheme to buy their first-home are exempt from the LVR rules.

Bridging loans

Short-term bridging loans where an owner occupier is purchasing a new property to live in before the sale of their current residence are exempt from the LVR rules.

Refinancing

Refinancing of existing residential mortgage loans (switching banks) is exempt from high LVR restrictions, as long as the loan balance does not increase.