The Reserve Bank of New Zealand (RBNZ) has announced it intends to ease mortgage loan-to-value ratio (LVR) restrictions from 1st December 2025, following a review of its macroprudential settings.
Acting assistant governor for financial stability, Angus McGregor, said the introduction of debt-to-income (DTI) restrictions last year had changed the balance of the central bank’s toolkit.
“Over the past year, we have reviewed our approach to setting LVR restrictions,” he said. “We concluded that the introduction of debt-to-income (DTI) restrictions last year means LVR settings can be less restrictive on average. This includes looser default settings that we expect will be in place most of the time, except for when risks are particularly elevated.”
McGregor said DTI restrictions were designed to underpin borrower resilience and act as a guardrail against high-risk lending.
“Easier LVR settings will give banks more flexibility to lend, improving market efficiency and access to credit, particularly for first home buyers,” he said. “Now is an appropriate time to move to the new default settings. House prices are within our range of sustainable estimates. Growth in mortgage lending remains moderate and the share of high-risk lending is low.”
From 1st December, the limit on the share of new lending with an LVR above 80% for owner-occupiers will rise to 25%, up from 20%. For investors, the share of lending permitted above a 70% LVR will increase to 10%, up from 5%. The RBNZ will consult with banks on changes to their Conditions of Registration over the next two weeks as part of the implementation process.
McGregor said the central bank had also reviewed its DTI settings and opted to leave them unchanged. “They remain calibrated to limit high-risk lending in housing upswings and periods of low interest rates, without the need for adjustment,” he said. Oversight of both LVR and DTI frameworks will transition to the new Financial Policy Committee from next year, with reviews scheduled at least annually.