Since October 2013 LVR restrictions have been in place when purchasing a property, but no more! Yesterday on the 30th April, the Reserve Bank announced their decision to remove LVR restrictions for 12 months.
All locally incorporated banks who responded during the week long submission period were in favour of removing LVR restrictions, believing it will allow them to support customers through the impact of Covid-19.
However, views from other submissions varied, with some voicing concerns about potential adverse impacts on financial stability, such as the risk of bank failure. Also noting that with the economy weakening and job security reduced, the ability of people to service a mortgage will likely decline in the coming months.
In response to this, the Deputy Governor and General Manager of Financial Stability Geoff Bascan has said “given the current uncertainty around the economic outlook, the Reserve Bank considers that it is unlikely that banks will weaken lending standards to high risk borrowers. The more likely risk is that banks are overly cautious with lending to credit-worthy borrowers."
The decision is effective as of 1 May 2020. The change will be made via a change in bank Conditions of Registration.
However the decision will be reviewed in 12 months, with Bascan stating that “the Reserve Bank will monitor lending activity and feedback from retail banks over the next 12 months as the economic impact of the COVID-19 pandemic becomes clearer. While we’ve eased the restrictions completely for the next twelve months, we will review the most appropriate setting for LVRs in a year’s time".
Great news for those wanting to expand their portfolio.
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