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Reserve Bank to ease mortgage lending restrictions

Author
Tom Raynel,
Publish Date
Tue, 14 Oct 2025, 1:21pm
The Reserve Bank intends to ease mortgage loan-to-value ratio restrictions from December 1. Photo / 123RF
The Reserve Bank intends to ease mortgage loan-to-value ratio restrictions from December 1. Photo / 123RF

Reserve Bank to ease mortgage lending restrictions

Author
Tom Raynel,
Publish Date
Tue, 14 Oct 2025, 1:21pm

The Reserve Bank is to relax restrictions on lending by banks making it easier for low deposit borrowers.

From December, commercial banks will be allowed to do up to 25% of new lending to owner-occupiers with a deposit of less than 20%.

That’s up from the current speed limit of 20%.

At the same time, banks will be allowed to do up to 10% of lending to investors with deposits or equity of less than 30%, up from the 5% current limit.

Reserve Bank acting assistant governor of financial stability Angus McGregor said that over the past year the bank had reviewed its approach to setting loan to value ratio (LVR) restrictions.

“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.”

DTI restrictions help to underpin borrower resilience by acting as a guardrail for risky lending, helping contain the severity and consequences of housing market corrections.

McGregor confirmed DTI settings would remain unchanged as they are set to limit high-risk lending in housing upswings and periods of low interest rates, without the need for adjustment.

“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.”

The Reserve Bank will consult with banks on changes to their Conditions of Registration over the next two weeks.

Government welcomes change

Finance Minister Nicola Willis welcomed the news, and said that home ownership is part of the Kiwi dream.

“Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder.

“Presently, only 20% of the new loans banks are allowed to make to owner-occupiers can go to buyers who have deposits of less than 20% of the value of their properties. The Reserve Bank is proposing to increase that limit of new lending to 25%. That will make more funding available to first-home buyers.”

Willis said she looked forward to hearing the outcome of the Reserve Bank’s consultation with the commercial banks.

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.

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