New loan rules intended to cool housing market
Median Timaru house prices continue to rise with no sign of the trend changing, according to Professionals Real Estate.
The median house price for Timaru last month reached $267,375, compared with $263,500 in June, an increase of nearly 1.5 per cent.
However, the number of recorded residential house sales barely moved, with 52 last month, compared with 54 in June and 55 in July last year.
Reserve Bank Governor Graeme Wheeler announced yesterday restrictions on low-equity home loans, which will come into force on October 1. The measures include that banks will have to restrict new lending with loan-to-value ratios (LVRs) of more than 80 per cent to no more than 10 per cent of the dollar value of their new housing lending flows.
That will dramatically reduce the number of high LVR loans the banks are writing, making it much harder to get a mortgage with a deposit of less than 20 per cent.
That would make it difficult for many first-home buyers to save the more than $50,000 deposit required for an average home in Timaru.
"The LVR restrictions are designed to help slow the rate of housing-related credit growth and house price inflation, thereby reducing the risk of a substantial downward correction in house prices that would damage the financial sector and the broader economy," Mr Wheeler said.
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