The Reserve Bank of New Zealand (RBNZ) said on Tuesday it plans to ease mortgage restrictions as a response to the economic downturn caused by the coronavirus pandemic.
New Zealand has been in lockdown for about a month to beat COVID-19, the disease caused by the new coronavirus, and the measures were further extended on Monday.
RBNZ said in a statement it was proposing the removal of restrictions on the mortgage loan-to-value ratio (LVR), a measure of how much a bank lends against a mortgaged property, compared to the value of that property.
The bank said it intends to remove the LVR restrictions for a period of one year until 1 May, 2021.
It would consult on the proposal for seven days and a decision would be taken after that. If the decision is made to remove the restrictions, the Reserve Bank will monitor lending activity and feedback from retail banks over the next 12 months.
After that period, it will review whether to reinstate LVR restrictions, it said.
The move will help banks to keep lending to support customers, including with mortgage deferrals, Deputy Governor Geoff Bascand said in the statement.
Under the current LVR restrictions banks can make up to 20% of their residential mortgage lending to owner-occupiers who have deposits of less than 20%. No more than 5% of residential mortgage lending to can be to investors with less than 30% deposit.
(Reporting by Praveen Menon; Editing by Chris Reese and Lincoln Feast.)
