RBNZ confirms new LVR rules
The Reserve Bank of New Zealand has confirmed that new rules forcing rental property investors to stump up with a minimum 40 per cent deposit will apply nationwide from October 1. The bank regulator originally announced, in mid-July, a proposal for a third round of restrictions to apply from September 1, but last month deferred the start date by one month to October 1 after banks said they had a large pipeline of pre-approvals to work through. The Reserve Bank said on Monday it had completed consultation on the proposal and confirmed the plan to impose the 40 per cent deposit requirement on rental property investors. This is a tightening from rules applied from November 1 last year to rental property investors in Auckland requiring a 30 per cent deposit. Rental property investors outside Auckland were previously treated the same as owner-occupiers, but the changes announced yesterday pull them into the net. Owner occupiers will continue to be limited to requiring a 20 per cent deposit, although banks are allowed exemptions for up to ten per cent of new lending, which the RBA refers to as its 'speed limit'. A speed limit of five per cent applies to the restriction on high loan to value ratio lending for rental property investors, which is unchanged from the mid-July proposal.The only minor changes to the mid-July proposals were to widen the exemptions for new buildings to those buildings completed within the previous six months, and to allow landlords to borrow to pay for renovations of buildings to account for tougher new building standards on insulation and smoke alarms. The original proposal was for an exemption for buildings up to the point where ground works had started.