LVR exemption for building welcomed

The Reserve Bank has exempted new homes from its LVR regulation. Photo from NZ Herald.

While welcoming the exemption, the Labour Party criticised Westpac bank's decision yesterday to charge higher interest rates for low-deposit borrowers, claiming the Government had created a ''two-tier home lending market''.

Reserve Bank deputy governor Grant Spencer announced yesterday that the central bank, having consulted the building industry and other banks, would exempt new residential construction loans from the LVR restrictions, which were introduced on October 1.

The LVR sought to keep overall bank mortgage lending to people who had less than a 20% deposit, at 10% of banks' lending portfolios, putting first-home buyers at a further disadvantage.

''While high LVR construction lending is only around 1% of total residential lending, it finances around 12% of residential building activity,'' Mr Spencer said in a statement.

''This exemption means that low deposit lending will fall outside the 10% speed limit if it is financing the construction of a new house or apartment.''

Labour's Housing spokesman Phil Twyford said recent evidence from the Registered Master Builders Federation, that the LVR was putting thousands of new builds at risk, ''blew a hole'' in the Government's policy of trying to increase housing supply.

Warwick Quinn, chief executive of the Registered Master Builders Federation, said he had no doubt it was research from independent consulting company for the building industry, Branz, released late last month, which influenced the policy change.

It showed 5000 new houses, not the previously estimated 3000, could be jeopardised by applying LVRs to new house construction.

''The information the banks keep on how much lending they do on new house construction is not great,'' Mr Quinn said.

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LVR exemption for building welcomed