While the Reserve Bank is still in the consulting period until March 2021, ASB has made the bold move to reinstate the Loan-to-Ratio restrictions for investors only.
ASB chief executive Vittoria Shortt made the announcement saying, "ASB believes a balanced and sustainable housing market is in the best interests of all New Zealanders. While we appreciate the RBNZ taking the time to consult, this is about helping Kiwis build their financial futures during exceptionally challenging times so we are choosing to take this step now."
"The number of applications we’re receiving is at an all-time high, up 70% on this time last year, and while the proportion of first home lending is up, we have observed since Covid-19 a rapid increase in lending for investors. If this increase in investor demand continues it could lead the country down a potentially unsustainable path".
"That’s why we’re immediately committing to requiring investors to have a 30% deposit rather than the current 20%. Pre-approvals already in place are unaffected." Shortt has said.
With the huge increase in investor activity leading to this decision, it’ll be interesting to see how the market responds, and if other banks will follow suit.
For many investors, reinstated LVR restrictions won't make a huge difference to their investing plans, due to the amount of equity they already have. For the others, we suggest you invest sooner rather than later while interest rates are low, and before the LVR restrictions return in the full.
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