LVR Restrictions Loosen From 1 December

From 1 December 2025, the Loan-to-Value Ratio (LVR) restrictions will be eased which means in some circumstances banks will be able lend to buyers who don’t have a 20% deposit, including investors.  It won’t be a free-for-all and there are other protections in place to ensure borrowers can services their loans, but it’s great news for those struggling to save enough for a deposit in these tough financial times.  

A recap on the history of the LVR
The LVR was first introduced in 2013 to help protect both borrowers and the wider financial system by requiring a 20% deposit.  While there have been periods where banks have had greater flexibility, over the last 13 years, most New Zealanders have not been able to borrow more than 80% of their home’s value, which has ensured they’ve had a built-in financial buffer.  Ultimately the LVR was about curbing excessive lending, dampening speculative behaviour (where investors brought properties with the intention of selling them again quickly, for a profit) and generally creating more financial stability. 

Why are the LVR restrictions being loosened? 
There are now other protections in place to keep borrowing within sensible limits, namely the debt-to-income (DTI) restrictions which were introduced in 2024. This means that while a borrower may no longer need a full 20% deposit anymore, their application will still be subject to DTI checks to confirm they can comfortably service the loan. Generally, this means the debt they take on can’t exceed their annual income by more than six times.

Who will benefit from the relaxed LVR rules? 
By far, the biggest group to benefit will be first home buyers (particularly couples) who have limited savings but high incomes and strong earning potential.  It will also benefit investors who have significant equity but not enough cash to afford a 20% deposit. 

Will the market be flooded with new buyers as a result?
Come 1 December, we expect to see an uptick in interest from first home buyers and investors eager to test the waters with lenders, but not an overwhelming rush. While more people may approach banks to explore their borrowing options, responsible lending standards and DTI checks will temper the pace of new applications.

Next steps for first home buyers with less than 20% deposit saved
If you have been holding off on buying your first home or taking on an investment property because of strict deposit requirements, you may well be able to make a move. To start the process, we recommend going directly to your preferred bank and/or a mortgage broker such as Total Mortgages who have access to a wide range of lenders and can help you compare deals. Also remember that you will still need to be well-prepared with evidence of your income, spending habits, and any other financial commitments.