In response to the economic downturn caused by Covid-19, the Reserve Bank is proposing the removal of mortgage loan-to-value (LVR) ratio restrictions for 12 months, after which the changes will then be reviewed.
The motivation is to help banks to keep lending to support customers, including helping current borrowers who are requesting mortgage holidays.
As Deputy Governor and General Manager of Financial Stability Geoff Bascand says “LVRs were introduced as a macro-prudential financial stability tool in October 2013 and have been adjusted over time. Adjusting the use and calibration of macro-prudential tools in response to economic conditions is how they are intended to be used". If put into effect, the change will be made by installing a change in bank Conditions of Registration.
The Reserve Bank will monitor lending activity and feedback from retail banks over the next 12 months as the effects of the pandemic become more apparent.
Currently the Reserve Bank is in the consulting stage for seven days and expect to make a decision promptly after that. Public consultation is open during this period. If you want to give feedback on the proposal you can email email@example.com