Loan-to-valuation ratio restrictions
Temporary limits on high loan-to-value ratio (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 November 2020, the Reserve Bank announced that the Reserve Bank will consult about re-instating LVR restrictions on high-risk lending with effect from 1 March 2021. The consultation will be launched in December 2020.
LVR lending restrictions differ depending on whether a loan is secured by residential investment property or owner-occupied residential property. The previous limits that applied to bank lending to investors and owner-occupiers are shown below.
Investor loans – 30% deposit / 5% of investor lending
LVR lending restrictions are tighter for investor loans due to the higher risks associated with this type of loan. The current policy classifies investor loans as high-LVR if they are more than 70% of the property’s value, and restricts high-LVR lending to no more than 5% of a bank’s total new investor lending.
Owner occupier loans – 20% deposit / 20% of owner occupier lending
This class of loan is for borrowing secured against owner occupied property. The current policy classifies owner occupier loans as high-LVR if they are more than 80% of the property’s value, and restricts high-LVR lending to no more than 20% of a bank’s total new owner-occupier lending.
There are some exemptions relating to borrowing to build a new home, for non-routine repair work (e.g. fixing leaky homes) on existing properties, bridging finance, refinancing of existing loans, shifting loans from one property to another (provided the total value of the loan does not increase) and loans made under the Housing New Zealand Mortgage insurance scheme (including Welcome Home Loans). The construction exemption covers any loan for a residential property purchase under the government’s Kiwibuild programme. In addition, borrowers with owner occupied and investment property collateral can use the combined collateral exemption to obtain finance up to 70% of the value of the investment properties and 80% on their owner occupied property.
Please note: LVR restrictions apply to new high-LVR loans, and not retrospectively to existing loans. Existing borrowers are only affected if they want to take out a ‘top up’ loan. Banks will still apply their own lending criteria to individual borrowers and may choose to not provide finance in certain circumstances or to provide it only at lower LVRs.
- LVR restrictions - FAQs
- LVR restrictions at a glance
- LVR Factsheet: A guide for borrowers (PDF 141KB)
- Construction exemption to LVRs (PDF 101KB)
- C30 New residential mortgage lending: Loan-to-valuation ratio (LVR) data
- C31 New residential mortgage lending by borrower type
- A deeper look at recent housing market trends: Insights from unit-record data
- Framework for Restrictions on High-LVR Residential Mortgage Lending (BS19) (PDF 447KB)
- Response to submissions on adjustments to restrictions on high-LVR Residential Mortgage Lending (PDF 1MB)
- Responses to Official Information requests about LVR restrictions
News and updates
- 11 November 2020 - Further regulatory steps to promote cashflow confidence and stability
- 30 April 2020 - Reserve Bank removes LVR restrictions for 12 months
- 21 April 2020 - Reserve Bank proposes to remove LVR restrictions
- 28 November 2018 - Reserve Bank to ease loan-to-value ratio restrictions
- 29 November 2017 - Reserve Bank to ease LVR restrictions
- 5 September 2016 - Reserve Bank confirms nationwide restrictions on loans to property investors
- 12 August 2016 - LVR start date deferred until 1 October 2016
- 19 July 2016 - Reserve Bank consults on new nationwide investor LVR restrictions
- 7 July 2016 - Housing risks require a broad policy response – a speech by Grant Spencer
- 24 August 2015 - Investors adding to Auckland Housing Market risk - a speech by Grant Spencer
- 21 August 2015 - Media Release - Reserve Bank responds to submissions on LVR rule changes
- 3 June 2015 - Consultation on Auckland investor restriction
- 13 May 2015 - Reserve Bank announces new LVR restrictions on Auckland housing
LVR consultation history
- April 2020
- LVR restrictions were removed for 12 months effective 1 May to ensure that they didn’t have an undue impact on borrowers or lenders as part of the mortgage deferral scheme implemented in response to the COVID-19 pandemic.
- November 2018
- LVR restrictions were eased at the start of 2019 after a short consultation with the banking industry. This resulted in minor revisions to BS19 of the Banking Supervision Handbook (PDF 447KB) effective from 1 January 2019.
- January 2018
- LVR restrictions were eased at the start of 2018 after a short consultation with industry. This resulted in minor revisions to BS19 of the Banking Supervision Handbook (PDF 447KB).
- September 2016
- The Reserve Bank published a response to submissions (PDF 1 MB) on changes to the Loan to Value Ratio restriction rules (LVRs). The changes were reflected in an updated version of BS19 of the Banking Supervision Handbook (PDF 174 KB).
- July 2016
- The Reserve Bank published a consultation paper (PDF 1.2 MB) on further adjustments to the LVR policy.
- August 2015
- The Reserve Bank finalised changes to the capital adequacy requirements for residential mortgage loans for investment properties. This included defining owner-occupied property for the purposes of new LVR restrictions (PDF 70KB).
- The Reserve Bank published a response to submissions on changes to the Loan to Value Ratio restriction rules (LVRs). The Reserve Bank also released a Regulatory Impact Assessment as part of the response to submissions. The changes were reflected in an updated version of BS19 of the Banking Supervision Handbook (PDF 1.2MB).
- June 2015
- The Reserve Bank published a consultation paper on proposed changes to the LVR policy (PDF 1.37MB) (amended 4 June), including tighter restrictions on Auckland investor lending.
- March 2014
- The Reserve Bank responded to submissions on the construction exemption (PDF 126KB) in BS19 (PDF 252KB) and finalised the exemption. The Reserve Bank also consulted on some minor changes to BS2A/BS2B that required minor consequential changes to BS19 (PDF 150KB). These were finalised in June 2014 (PDF 170KB).
- December 2013
- The Reserve Bank announced it would introduce an exemption for high-LVR construction lending. Questions and Answers about the construction lending exemption (PDF 101KB) were also released. A related consultation paper (PDF 129KB) and draft of BS19 (PDF 301KB) were released on 20 December 2013.
- October 2013
- The Reserve Bank released documents relating to the development and implementation of restrictions on high-LVR mortgage lending.
- August 2013
- The Reserve Bank announced its intention to implement restrictions on high loan-to-value ratio (LVR) lending. From 1 October 2013, banks must restrict new residential mortgage lending at LVRs over 80 percent (a deposit of less than 20 percent) to no more than 10 percent of the dollar value of their total new residential mortgage lending. The Reserve Bank also released a Regulatory Impact Assessment (PDF 681KB) of this policy.
- The Reserve Bank published its Response to Submissions (PDF 245KB) and revised "Framework for restrictions on high-LVR residential mortgage lending" (BS19) (PDF 252KB) and "Statement of Principles" (BS1) (PDF 242KB). The Reserve Bank’s final framework for the operation of LVR restrictions following consultation.
- June 2013
- The Reserve Bank released a technical consultation package relating to restrictions on high loan-to-value ratio (LVR) residential mortgage lending. This package included a consultation paper (PDF 189KB), and proposed changes to the Banking Supervision Handbook and banks’ conditions of registration, set out in the draft "Framework for restrictions on high-LVR residential mortgage lending" (BS19) (PDF 193KB). It also included draft changes to the "Statement of Principles" (BS1) (PDF 689KB).