BDO Know How August 2016: New Lending Restrictions

From 1 September 2016, the Reserve Bank will implement new residential lending restrictions on property investors. These restrictions mean that 95 percent of bank lending to property investors will require a 40 percent deposit. This is effectively an extension of the lending restrictions previously applied to the Auckland market spreading nation-wide.

The measures are the Reserve Bank’s attempt to dampen the demand for residential property houses and to the address bank’s exposure to riskier mortgages.

Your bank may still lend if your deposit is less than 40 percent, however lending of this nature will only be available to 5 percent of all new loans to property investors.

Your 40 percent deposit can be a mix of cash and equity, effectively the bank needs to be sure there are reserves to draw on should things go awry.  

The definition of a property investor is someone who owns a house which is not ‘owner-occupied.’ There are a few exceptions to this, such as holiday houses used exclusively for private use. Lending to investors for construction of new houses and non-routine repairs will not be subject to the new rules.