Eased Lending Rules Boost Path to Home Ownership for First-Time Buyers

Minister Willis explained that under the current framework, commercial banks may allocate only 20 per cent of new lending to owner-occupiers who have deposits of less than 20 per cent.

New Zealand’s aspiring first-home buyers are set to gain improved access to the property market following significant changes to bank lending rules announced by the Reserve Bank. Finance Minister Nicola Willis has welcomed the updates, saying they will give more young families a fairer chance at achieving the long-held Kiwi dream of home ownership.

The Reserve Bank has confirmed that it will loosen its Loan-to-Value Ratio (LVR) restrictions, allowing banks to lend a higher proportion of mortgages to buyers with smaller deposits. These changes, which take effect on 1 December, come at a time when many first-time buyers are actively entering the market, taking advantage of eased prices and more favourable mortgage rates.

Minister Willis explained that under the current framework, commercial banks may allocate only 20 per cent of new lending to owner-occupiers who have deposits of less than 20 per cent. Next month, this cap will lift to 25 per cent. The adjustment means more buyers—especially younger households—will be able to access home loans with smaller upfront savings.

According to Minister Willis, the impact is expected to be substantial. “The easing of the Reserve Bank’s Loan-to-Value Ratio restrictions will help more young families to achieve the Kiwi dream of owning their own homes,” she said. “This means more opportunities for people to get a foot on the property ladder.”

Data continues to reinforce the importance of this policy shift. Research firm Cotality recently reported that in the three months to September, first-home buyers made up a record 27.7 per cent of all property purchases across the country. Minister Willis highlighted that around 80 per cent of borrowers with deposits below 20 per cent are first-time buyers, showing the vital role these adjustments play in improving housing access for new entrants.

The Reserve Bank is also making changes that will affect property investors. The proportion of loans banks may offer to investors with deposits of less than 30 per cent will rise from 5 to 10 per cent. While this provides additional flexibility to investors, the overall focus of the adjustments remains on strengthening housing affordability for ordinary New Zealanders.

These changes come after the Reserve Bank’s introduction of debt-to-income (DTI) restrictions last year. DTIs limit how much individuals can borrow relative to their household income. Minister Willis noted that the central bank considers the DTI rules an important safeguard that enhances the resilience of the financial system. With these protections in place, the Reserve Bank believes it can safely ease LVR restrictions without increasing systemic risk.

Together, the updated lending rules form part of a broader effort to stabilise the housing market while supporting responsible borrowing. For many families, the change represents the difference between waiting several more years to buy a home and stepping into the market sooner.

As New Zealand continues to grapple with housing shortages, affordability challenges, and shifting economic conditions, the easing of LVR restrictions signals a step toward greater accessibility and opportunity for first-time homeowners—helping more Kiwis realise the stability and security that come with owning a place to call their own.