LVR loop­hole high­lighted

Southern Real Estate Guide - - FRONT PAGE -

A loop­hole in ap­ply­ing LVR re­stric­tions means home own­ers are strug­gling to get bridg­ing fi­nance and are ef­fec­tively shut out of the in­tensely com­pet­i­tive prop­erty mar­ket.

Mort­gage Ex­press, a mort­gage ad­vi­sory com­pany, is calling for the Re­serve Bank to pro­vide greater clar­i­fi­ca­tion to banks and fi­nan­cial lenders around LVR re­stric­tions, say­ing owner-oc­cu­piers are find­ing they can­not pur­chase prop­erty be­fore sell­ing their ex­ist­ing home without trig­ger­ing new 40 per cent loan to value ra­tio re­quire­ments.

Mort­gage Ex­press NZ CEO Sarah John­ston says there is a re­luc­tance among banks and other fi­nan­cial in­sti­tu­tions to ap­prove ope­nended bridg­ing fi­nance for home own­ers in the wake of new LVR re­stric­tions, which are aimed at in­vestors.

If a home owner-oc­cu­pier has bought be­fore they sell­ing their ex­ist­ing home, tech­ni­cally the sec­ond prop­erty makes them an in­vestor and the new in­vestor LVR ra­tio re­quir­ing a 40 per cent de­posit comes into play, she says.

If in­vestor LVR rules are not ap­plied to the bridg­ing fi­nance, there is a risk that home owner could sim­ply say they had been un­able to sell the house and were now keep­ing it to avoid be­ing classed as an in­vestor.

‘‘It’s very un­clear and un­til that loop­hole is fixed there are le­git­i­mate owner-oc­cu­piers who are be­ing shut of out the mar­ket be­cause the banks haven’t been given clar­i­fi­ca­tion on how to ap­ply the new rules in a ‘buy be­fore sell­ing’ sit­u­a­tion.’’

Har­courts NZ CEO Chris Kennedy says its vi­tal LVR re­stric­tions for home owner/ oc­cu­piers are clar­i­fied for lenders im­me­di­ately.

‘‘At the mo­ment the sit­u­a­tion around bor­row­ing seems ex­tremely messy and un­clear. We’ve al­ways been pretty scep­ti­cal that the new LVR ra­tios for in­vestors would slow down the mar­ket as planned.

‘‘In an ex­tremely com­pet­i­tive mar­ket, home­own­ers of­ten find them­selves try­ing to buy be­fore they sell to avoid miss­ing out on their dream home. And without clar­i­fi­ca­tion around the rules, LVR re­stric­tions ap­pear to be ef­fec­tively shut­ting the peo­ple out of the mar­ket they were de­signed to help.’’

A loop­hole in ap­ply­ing LVR re­stric­tions is af­fect­ing bridg­ing fi­nance.

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