colinrealestate

The banks are moving to limit lending to people with less than 10% and have the ability to limit their risk to borrowers with 20% and above deposit. The Reserve Bank’s limit on LVR (high–loan–to-value) lending has affected some purchasers in the bigger cities, (some real estate agents are reporting), where 20% deposits are very difficult for first home buyers.

Currently the major banks write loans at LVR levels are at 29% of their lending; this will now reduce by one third. ASB’s move to cancel preapprovals for borrowers has had a chilling effect on some first home buyers as reported by the media. While many of the banks are reviewing who they will lend to, some bank’s lending criteria are strongly favouring the first home buyer as preference, other will lend only to existing customers, so it is time to shop around.

There is a mixed reaction from the loan markets as to the effect of the LVR, most believe that it will not affect the volume of sales within the residential real estate market, as investors will step in to pick up the slack. Other market influences are the slowly rising fixed interest rates in the past months; however, these have not yet had an effect on reducing house prices.

So while the Reserve Banks intention for the LVR is to have an effect on limiting house value increased, particularly in Auckland, the predictions are this will apply influence over a period of time, except in some markets such as Auckland and Christchurch whereby, supply and demand will still be the drivers on prices.

Filed under: REAL ESTATE | Tagged: Real Estate