by James Cambridge, Partner
ATTENTION FIRST HOME BUYERS AND INVESTORS. The dream of owning a home or investment property is about to become a little bit more of a reality, as LVR (loan-to-value ratio) lending limits are set to be relaxed.
On 1 January 2018, the Reserve Bank will lift the amount of funds that banks can lend to prospective buyers who have less than a 20 percent deposit. The amount will be increased from 10 percent to 15 percent and will make buying a home more of a reality for those struggling to make the 20 percent benchmark.
Changes will also be implemented for investors, with banks being able to lend up to 5 percent of their loan book to those with a 35 percent deposit, instead of the current 40 percent.
The changes will ultimately be a positive for people who have found it difficult to enter the property market, either to buy their first home or an investment property, since the LVR ratios were set in place in 2013.
As for investors, banks will now be able to loosen policies in light of the new changes which will have a positive impact for new investors.
While the announcement has come as a pleasant surprise for many, acting Reserve Bank Governor Grant Spencer has said that the changes have not been made to breathe life into the market. Caution to buyers should remain as the market is expected to remain moderate.
If you are a first home buyer, check out our other article on what to think about when buying a first home.