Since November 2021 many creditworthy borrowers have been blocked from obtaining finance by the LVR limits that were put in place due to the pandemic to reduce the risk to banks.
Restrictions on high-LVR residential mortgage lending set a ‘speed limit’ on how much new low-deposit lending banks can do. A loan-to-value ratio (LVR) is a measure of how much a bank lends against mortgaged property, compared to the value of that property.
The Reserve Bank has just confirmed new LVR limits that will apply from 1 June 2023.
Prior to 1 June 2023:
10% limit for loans with LVR above 80% for owner occupiers, and
5% limit for loans with LVR above 60% for investors
Post 1 June 2023:
15% limit for loans with LVR above 80% for owner occupiers, and
5% limit for loans with LVR above 65% for investors.
The restrictions that were put in place in November 2021 have now built resilience in our financial system. This has been evident in the past year as house prices have fallen without widespread impacts to financial stability. Our banks can now support increased lending for owner occupiers and investors and this is an excellent opportunity for those who have been held back by the LVR restrictions.
If you would like to find out how these changes affect your ability to borrow please contact us today to get expert advice on your situation.