Modifications to the Reserve Bank’s LVR policy, announced in May, are targeted specifically at Auckland residential investors. The speed limit has been eased for the rest of the country where housing markets are not subject to the same pressures. Our expectation is that investor LVRs will reduce financial system risk arising from this sector and assist in moderating the Auckland housing market cycle.
On the whole, these continue to be favorable times for the financial services providers, whether commercial banks or credit unions. Returns, which continue to be attractive, have been driven recently more by loan volume than margins. Household income has grown nicely while unemployment has remained low, and, together with low mortgage interest rates, these factors have contributed to appreciation in home values.