The Reserve Bank of New Zealand plans to relax mortgage loan-to-value ratio (LVR) restrictions starting 1 December 2025.
“Over the past year, we have reviewed our approach to setting LVR restrictions,” Acting Assistant Governor Financial Stability, Angus McGregor, explained.
“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,” he said.
DTI restrictions support borrower resilience by serving as a safeguard against risky lending. They also help limit the impact and severity of housing market corrections.
Relaxed LVR settings will provide banks with greater lending flexibility, enhancing market efficiency and credit availability, especially for first-time home buyers.
For McGregor, this is a suitable time to implement the new default settings, as house prices fall within the range of sustainable estimates, mortgage lending growth remains moderate, and the proportion of high-risk lending is low.
LVR settings include the following:
- For owner-occupiers, the limit on the share of new lending allowed with an LVR above 80% will increase to 25% (up from 20%).
- For investors, the limit on the share of new lending allowed with an LVR above 70% will increase to 10% (up from 5%).
RBNZ will engage with banks in consultations regarding changes to their Conditions of Registration over the next two weeks.
“We have also reviewed our DTI restrictions and decided to keep settings unchanged. They remain calibrated to limit high-risk lending in housing upswings and periods of low interest rates, without the need for adjustment,” McGregor added.