06.12.2016

Residential property finance

As of October this year, ‘speed limits’ were raised for LVRs. An LVR is a loan-to-value ratio – in other words, how much a bank can lend against a mortgaged property. ‘Speed limits’ are the restrictions on the amount of low deposit lending that banks can make.

LVRs were introduced in 2013 as a way to strengthen bank balance sheets and cool the rabid housing market and sky-rocketing house prices.

Of interest are borrowers deemed to have a high LVR. There are two types – Owner/occupier borrowers with LVRs of more than 80 percent (less than 20 percent deposit) and investor borrowers with LVR of more than 60 percent (less than 40 percent deposit).

Those borrowers are often stretched financially and, therefore, vulnerable to economic fluctuations. And a sharp fall in house prices poses a risk to the financial system and the banking system. The ‘speed limits’ now mean that only 10 percent of a bank’s residential mortgage lending and five percent of its investor mortgage lending can be made for high-LVR customers.

What this means is that where banks had once been comfortable lending, they may no longer have the capacity to provide mortgages. We are seeing the big banks become more selective about who they will lend to. This is where your partner at Finance New Zealand can assist. We work with specialist property funders as well as the major banks and know who has capacity to lend to high-LVR customers.

We can also assess your complete asset portfolio and create opportunities to leverage other assets – such as plant and machinery in your business, for example – to raise funds. Asset finance and debtor finance are good alternatives if your LVR is high, and there are other forms of finance available too.

Talk to your business partner at Finance New Zealand about how best to structure your debt to maximise fund availability.