The Reserve Bank surprised most people yesterday with its move to ease up the loan to value ratio (LVR) credit controls introduced in October 2013 then strengthened in October 2015 and July last year. From January 1 banks will be able to have up to 15% of mortgages with deposits less than 20% of the house purchase price for owner occupiers. Currently that is 10%. For investors the minimum deposit (with 5% of loans exempted) falls to 35% from 40%. Will these changes cause a new surge in the housing market? Clearly the Reserve Bank does not think so else they would not do it, and we also think a fresh wave of demand hitting the market and pushing prices newly skyward is unlikely. The fundamentals still support prices rising – but not at an accelerating pace. And the bulk of the repricing of the country’s housing stock to reflect changes in long-term fundamentals has probably already happened.
Read the rest of Tony Alexander's analysis here
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