A Comprehensive Update for First Home Buyers

A Comprehensive Update for First Home Buyers

For those dreaming of becoming homeowners, the journey has been quite a challenge lately. The ever-increasing property prices and strict lending criteria have made homeownership in New Zealand seem out of reach for many. However, there’s good news on the horizon as the lending landscape is undergoing some significant changes. Let’s take a look at what the recent modifications to Loan to Value Ratio (LVR) and Credit Contracts and Consumer Finance Act 2003 (CCCFA) could mean for first home buyers and existing borrowers.

Loan to Value Ratio

Loan to Value Ratio (LVR) Restrictions have been around since 2013 when the Reserve Bank of New Zealand introduced them to regulate high-risk mortgage lending and control the pace of house price growth. But starting from 1 June 2023, things are changing. The LVR will be eased to reflect the lower risks in the current lending environment. This means that banks will now be able to lend more to first home buyers with smaller deposits, opening up new lending opportunities.


On the other hand, the Credit Contracts and Consumer Finance Act 2003 (CCCFA), which was initially implemented in December 2021, aimed to ensure responsible lending practices. While it did help cool down the property market, it also had some unintended consequences. Borrowers who should have passed affordability tests were getting declined or approved for smaller amounts, and facing intrusive inquiries. However, the government has taken steps to address this, making incremental changes since July 2022. The final CCCFA regulation changes, effective from May 2023, will now provide more flexibility for lenders in calculating repayments and narrow down the expenses considered, which should simplify processes and speed up applications while still protecting consumers.


Additionally, the Official Cash Rate (OCR), set by the Reserve Bank to control inflation, had been raised incrementally to its highest level since 2008. However, the Reserve Bank recently indicated that it may have reached the end of its tightening cycle, given the easing inflation and slower consumer spending growth. This suggests that mortgage interest rates might be nearing their peak or have already done so. This is undoubtedly good news for homeowners facing interest rate hikes and those aspiring to buy a home, making affordability criteria more achievable.

Whether you’re a first home buyer, an existing homeowner, or a property investor, presenting a strong mortgage application is vital for success. To get tailored mortgage advice for buying your first home, upgrading to a new property, or investing, consider reaching out to us today. We will provide expert guidance and support to help you achieve your homeownership goals with ease.


Disclaimer: We want to emphasise that the content presented in this article serves as a general overview and is intended solely for informational purposes. Although we take great care to ensure accuracy and reliability, it’s important to remember that information is subject to constant changes and may not reflect the latest developments or cater to your specific circumstances. Therefore, before making any decisions based on the content herein, we urge you to exercise your judgment and seek independent advice. Your unique situation may warrant personalised guidance to make well-informed choices.