The Prime Minister's contesting new assertions loan-to-value restrictions on mortgages are locking first home buyers out of the property market.

The Property Institute's calling for first home buyers to be exempt from the measure on the back of research that shows 78 per cent of renters can't afford to buy a home under current LVR restrictions. 

But John Key said if it's based off the median house price in Auckland people don't always go and buy the average house price - so it depends on what's happening.

He said it's also not true that all borrowers are have to come up with a 20 per cent deposit.

What the rules mean is that banks have to have a certain amount of their balance sheet that can be in high LVR loans, he explained.

However, the First Home Buyers Initiative is welcoming the call by the Property Institute to scrap LVR restrictions on first home buyers.

Spokesman Jarred Jamison said it's something they have been pushing for because current restrictions makes it almost impossible for first home buyers to come up with a deposit.

"We have put a submission in to the minister about reducing or getting rid of the LVRs. Obviously, it's a Reserve Bank decision rather than directly to the minister, but we have put that submission forward."

He says the government and the Reserve Bank must ask themselves what type of property market they want to see 10 to 20 years down the track.

"The LVR restriction is a huge barrier, which needs to be taken down."