Reserve Bank plans to relax mortgage limits

The Reserve Bank of New Zealand (RBNZ) has announced it will consult on easing its loan-to-value ratio (LVR) restrictions from 1 December 2025, signalling a shift towards less onerous lending settings.

“Over the past year, we have reviewed our approach to setting LVR restrictions,” said RBNZ Acting Assistant Governor Financial Stability Angus McGregor. 

“We concluded that the introduction of debt-to-income (DTI) restrictions last year means LVR settings can be less restrictive on average. This includes looser default settings that we expect will be in place most of the time, except for when risks are particularly elevated.”

Under the proposed changes, the share of new owner-occupier lending with an LVR above 80% would increase from 20% to 25%.

For property investors with deposits of less than 30%, the cap would rise from 5% to 10%.

Finance Minister Nicola Willis welcomed the RBNZ’s intention. “Home ownership is part of the Kiwi dream. Relaxing the restrictions on the amounts banks can lend will make it easier for Kiwis to get a foot on the property ladder,” she said.

What these changes mean for borrowers

Easing LVR rules doesn’t mean that lending will suddenly become easy, but it could make a real difference for some borrowers. Higher allowable proportions of low-deposit lending can help more first home buyers enter the market and give existing homeowners greater flexibility when upgrading or investing.

However, LVRs are only one part of the RBNZ’s toolkit – and banks must still apply their own lending standards, including assessing income, expenses and overall financial stability. As a result, some borrowers who qualify under the new limits may still need to demonstrate strong savings habits or show they can comfortably service a loan if rates rise in the future.

If you know first home buyers or property investors who might need support navigating how these changes affect their finance options, I’d be grateful if you could refer them to me.