Banks' high loan-to-value ratio (LVR) residential mortgage lending has continued to fade away to virtually nothing, making up just 4.7% of new mortgage commitments in December.
As of October 1, according to new Reserve Bank rules, all banks were limited to committing no more than 10% of their new lending to mortgages exceeding 80% of the value of the property being bought.
New figures from the RBNZ just released show that the banks are more than keeping under the 10% "speed limit".
The latest figure of 4.7% of high-LVR lending compares with over 25% in September, the last month before the speed limit took effect.
In December there was a total commitment of new mortgage lending by the banks of $4.509 billion.
Of this, $4.258 billion was on properties with an LVR of 80% or below, while just $252 million was committed for so-called high-LVR loans (above 80%).
Some $42 million worth of mortgages for loans above 80% but exempt from the new rules were also advanced.
In total the banks' share of high-LVR lending before exemptions was 5.6% and 4.7% after exemptions.
The latest figures compare with high-LVR figures of 7% before exemptions and 5.8% after exemptions in November.
And those figures compared with 12.7% (before exemptions) and 11.7% (after exemptions) for October.
The figures as of yet do not include the more recently announced exemption on new builds, which is being applied retrospectively to October 1. Therefore it can be expected that the current LVR figures being produced by the banks will ultimately show even smaller percentages of high LVR loans once the new build exemptions are retrospectively incorporated.
When the RBNZ announced last August that it was introducing the LVR speed limit from October 1, this was in response to figures showing that some banks were rapidly increasing the proportion of high-LVR lending on new commitments.
The RBNZ was concerned about a potential risk to financial stability that could occur from a sudden shock to the housing market.
First home buyers are those seen as most effected by the LVR restrictions the Government was known to have wanted to have first-time buyer exempted, but the RBNZ was not keen on exemptions. However, it subsequently relented on exemptions for new builds.
Exempted lending categories include lending made under Housing New Zealand’s Welcome Home Loans scheme, refinancing of an existing high-LVR loan, bridging finance or the ‘porting’ of a high-LVR loan between properties.
The RBNZ is in the process of consulting with banks on the new builds exemption, with submissions open on this till February 14. Once the consultation process is complete then the figures from the banks will included loans affected by the new builds exemption.
The latest figures released by the RBNZ should not be construed as indicating where the banks actually stand at the moment in respect to the overall speed limit - though they give some indication.
The RBNZ says that banks’ compliance with the high-LVR speed limit will initially be measured against the average high-LVR share after exemptions figures taken from October 1, 2013 to March 31, 2014. Thereafter, it will be measured against the 3-month rolling average for the larger banks (ANZ, ASB, BNZ, Kiwibank and Westpac) and the 6-month rolling average for the smaller banks.
Clearly at the moment the banks are taking no chances that they will exceed the 10% speed limit when the first overall calculation of it is made after March 31.