Hope on horizon for home buyers struggling with deposits

New houses at the Hobsonville Point development. The Reserve Bank expected to signal future plans for changes to LVRs today.

Relief could be in sight for first-home buyers struggling to get a big enough deposit to buy a house, with the Reserve Bank expected to signal future plans for changes to LVRs today.

The bank will release its Financial Stability Report today and Acting Reserve Bank Governor Grant Spencer is expected to deliver on hints earlier this month of further announcements on the LVRs, including the criteria the Bank will apply before lifting the restrictions on lending that have been in place since 2013.

It comes as there are growing calls to review the restrictions on bank lending to home buyers, especially first-home buyers, as the property market cools.

Finance Minister Grant Robertson said it was up to the Reserve Bank to decide on any changes, the Government was concerned about their impact on first-home buyers.

"We from the beginning have been concerned about the impact of LVRs on first-home buyers. Obviously we've seen some change in the balance in the housing market between investors and first-home buyers. We want to do everything we can to support first-home buyers. That remains our chief concern with the implementation of LVRs."

National leader Bill English said the restrictions were intended to be temporary and the Bank should be looking at the conditions under which it would lift those. "Whether the conditions are met now is a matter for the Bank."

The LVR restrictions have been in place since 2013 to try to ease pressure on the property market – especially in Auckland. They were most recently adjusted in 2016.

Finance Minister Grant Robertson said it was up to the Reserve Bank to decide on any changes, but the Government wanted "to do everything we can to support first-home buyers". Photo / Mark Mitchell

Under the current restrictions most home buyers need at least a 20 per cent deposit to get a mortgage – banks can only give out 10 per cent of its mortgages to those with lower deposits.

Since October last year, those buying investment properties have needed 40 per cent deposits.

Prices in Auckland have since flattened and some are dropping slightly, which English said was a "sensible adjustment" to the market.

Bank economists are tipping the Governor will hold off on making changes until election-related volatility in the property market settles down – possibly after summer.

The Real Estate Institute (REINZ) has called for the restrictions on first-home buyers to be loosened, such as by allowing more first-home buyers to get into the market on lower deposits.

CEO Bindi Norwell said it was time to review the model. "The LVRs have done a really good job at moderating growth already, you can see that in the market."

"We think 20 per cent is too high. If we looked at lowering that, it would be good. But it is important to ensure first-home buyers are not too heavily leveraged.

Bankers' Association chief executive Karen Scott-Howman said the Reserve Bank had always said the restrictions were a temporary measure.

"Banks are responsible lenders and that wouldn't change if the Reserve Bank decided to ease the lending restrictions."

However, she said easing the restrictions would give banks more flexibility to respond to the needs and circumstances of their customers.

QV National spokeswoman Andrea Rush said the LVRs had affected home owners who wanted to move to another property as well as first-home buyers.

"People who had bought a first home and were then looking to move, they also needed that 20 per cent deposit. This plus the price growth and stricter lending criteria made it harder to take that next step up the ladder because they still had a relatively big mortgage."

That meant families were staying in their first home for longer, rather than those first homes coming back onto the market.

Property Institute chief executive Ashley Church said its surveys showed a drop in confidence in the property market over the past year, with a significant increase in the number of people who expected property prices to stay the same or drop.

"It is clearly a reflection of these artificial lending restrictions so the Reserve Bank should be taking steps sooner rather than later to relax its loan-to-value ratios to ensure the engineered slowdown in the housing market doesn't turn into an out of control slump."

The latest CoreLogic Buyer Classification data for October showed first-home buyers made up 22 per cent of the sales – the highest proportion since 2007. About 27 per cent were bought by people moving house – down from about 30 per cent in 2007 while property investors made up 39 per cent of sales down from a peak of 41 per cent.