Recently we did an article explaining the new Loan to Valuer Ratio (LVR) restrictions imposed by the Reserve Bank set to come in on 1/10/2015 – most predominantly the reduction of the maximum LVR on Auckland investment properties dropping from 80% to 70%. This means that to purchase an investment property in Auckland you would need a 30% deposit as opposed to a 20% deposit. These restrictions have been brought in to try and cool the buoyant market in Auckland and ease house prices.
While these restrictions are not to be imposed until 1st October 2015 a recent news release by the ANZ bank shows that lenders are taking a cautious approach and already warning that they will impose the new rules earlier than 1st October 2015. We saw the same reaction when the Reserve Bank imposed their initial restrictions a couple of years ago. The banks had to have no more than a 10% of their lending book allocated for above 80% lending. Most lenders had well in excess of this cap. So in the months leading up to the time when the official restrictions were to take effect the banks reduced the availability of above 80% lending. They had to “cull” a certain percentage of their above lending book to bring it to within that 10%. They did this by almost stopping altogether all lending above 80% in the months leading up to the date.
When the lenders dropped to within the required levels (ie they had less than 10% of their lending book for loans above 80%) they relaxed their policies making above 80% easier to secure.
We can see the same sort of behaviour from lenders for this new amendment imposed by the Reserve bank in restricting how much lenders are able to lend on Auckland Investment properties. These restrictions shouldn’t stop anyone from developing an investment portfolio – but it will impact on their options as to where they could invest.
It should be noted that while these new measures restrict investors in Auckland the other restrictions currently in place are easing. For owner occupied homes the old rules meant that only 10% of the lenders portfolio could be available for above 80% lending but under the new rules this is to be increased to 15% making more funds available for the purchase of owner occupied homes.
Our recommendation for those who already own Auckland investment properties or considering purchasing an Auckland investment to discuss ongoing strategies with their Mortgage Broker – we suggest that this needs to be done sooner rather than later in order to take advantage of the opportunity of what is available today which may be gone tomorrow. For those looking to purchase a home to live in it’s about to get a little easier so what may have applied in recent years may not apply in the upcoming months. Your mortgage broker will be able to identify strategies that will allow you to still advance towards your financial goals while operating within this new climate.
