Tightening Loan-to-Value Ratio restrictions

Release date

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. The restrictions have been revised over time and were removed in response to the economic impact of the COVID-19 pandemic in 2020 and later reinstated at 1 March 2021 at the same level as prior to the onset of COVID-19, with a further tightening of investors’ restrictions taking effect on 1 May 2021.

On 3 September 2021 we launched a consultation on a proposal to restrict the amount of lending banks can do above an LVR of 80 percent to 10 percent of all new loans to owner-occupiers, down from 20 percent. An alternative proposal was to maintain the 20 percent limit, but lower the LVR threshold to 75 percent (from 80 percent) – meaning that the majority of new owner-occupier borrowers would need a 25 percent deposit. The former option was our preferred approach.

On 23 September 2021 we announced that we would be proceeding with our proposal to tighten LVR restrictions on lending to owner-occupiers to reduce risky mortgage lending, with the change to take effect from 1 November 2021.

Read the Summary of Submissions (PDF 822KB)

Read the Regulatory Impact Statement (PDF 1.2MB)

Read the September 2021 LVR Consultation Full Submissions (PDF 3.6MB)