Group claims the removal of LVR restrictions puts profit ahead of family wellbeing
The Reserve Bank of New Zealand (RBNZ) has decided to remove loan-to-value ratio (LVR) restrictions for 12 months as part of its mortgage deferral scheme implemented in response to the COVID-19 crisis. However, Shift Aotearoa seems to be unhappy with the central bank’s decision.
Brennan Rigby, project lead for Shift Aotearoa, claimed that the removal of LVR restrictions puts profit ahead of family wellbeing.
“A lot can be done to create and sustain a stable housing system. We should start by making the wellbeing of families in homes our key concern and then view decisions through that lens. There was no reference to family wellbeing in the Reserve Bank consultation,” Rigby said.
“The consultation period was very short, and the material outlining the implications of the proposal was insufficient, given the significance of this move.”
Read more: Realtor owner backs removal of LVR restrictions
Rigby brought to light the changes to LVR restrictions in 2016 and identified lower interest rates and economic slow-down caused by COVID-19 as crucial differences between 2016 and 2020.
“COVID-19 and the economic slow-down are at the heart of the Reserve Bank reasoning, but there is no indication of how these competing outcomes have been balanced,” he said.
“The success of the 2016 LVR iteration was not about stopping investment or stalling investors. It was about stabilising the market, testing and ensuring our real estate bubble hadn’t expanded too far – a huge risk to our economy, and trying to give families a shot at owning a house one day.”
Rigby said the country would return to the same regulatory environment in 2016 without LVR restrictions, particularly sky-rocketing prices and “investors dominating auctions with more capacity to stretch their finance.”
“There is a time and place for fast decisions. The process suggests the audience was expected to be ‘industry only’, but the implications of the change go way beyond the banking industry,” he said.
“I’m disappointed [that] an instrument that RBNZ’s own evaluation declared a success – the LVR restrictions - has been so easily extinguished, with so little information.”
