Final decision and implementation
On 23 September we announced our decision to proceed with our proposal to tighten LVR restrictions on lending to owner-occupiers to reduce risky mortgage lending.
The new restrictions will take place from 1 November 2021 and will restrict the amount of lending banks can do above an LVR of 80% to 10% of all new loans to owner-occupiers, down from 20% percent at present.
We released a Summary of submissions and a Regulatory Impact Statement.
The proposed policy change will take effect by altering banks’ Conditions of Registration (CoR). We launched a short consultation on the required changes to banks’ CoR on 23 September 2021.
About LVRs
A loan-to-value ratio (LVR) is a measure of how much a bank lends against mortgaged property, compared to the value of that property. Limits on high LVR residential mortgage lending have been in place since October 2013.
We have revised the restrictions over time and removed them in response to the economic impact of the COVID-19 pandemic in 2020. We subsequently reinstated the restrictions on 1 March 2021 at the same level as before the onset of COVID-19, with a further tightening of investors’ restrictions taking effect on 1 May 2021.