LVR limits set to return
The Reserve Bank plans to reintroduce loan to value ratio restrictions on mortgage borrowers from March next year following a surge in the housing market.
Wednesday, November 11th 2020, 8:36AM 
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In an announcement this morning, the Reserve Bank said it would begin a consultation next month about re-instating LVR restrictions on high-risk lending.
LVR restrictions were scrapped in May for one year, yet the RBNZ appears to be performing a U-turn, amid record growth in house prices.
If LVRs return, they would kick in again from March 1, 2021, the central bank said.
The restrictions were removed in the wake of the pandemic to stimulate lending and help borrowers who deferred mortgage payments and accumulated extra interest on their loans.
The RBNZ said a rise in "higher-risk investor lending" prompted its decision.
It is unclear whether LVRs will return just for investors.
RBNZ deputy governor Geoff Bascand said "circumstances in the lending market have since improved and we are now observing rapid growth in higher-risk investor lending. We will consult about re-instating the restrictions we had in place pre-Covid, which limited the amount of high-risk lending that banks could make."
The RBNZ will reveal more about the consultation when it publishes its latest Financial Stability Report later this month.
Westpac economist Dominick Stephens said: "We interpret this combination of announcements as the RBNZ starting to address the widespread concern that its low interest rate policy is boosting house prices more than other parts of the economy."
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Why must we always go through a “consultation process” at the Reserve Bank to make changes whenever they have to make a U-turn on policy? Wombles!