Reserve Bank Deputy Governor Grant Spencer said banks had indicated they needed more time to meet the new LVR restrictions proposed by the Reserve Bank in July.
This was due to the pipeline of loan pre-approvals made prior to the Reserve Bank’s announcement, he said.
“We understand that banks have been applying the new LVR restrictions to new loan applications since the LVR changes were announced.
“On that basis we will defer the formal introduction of the changes to 1 October in order to accommodate the backlog of pre-approvals.”
Spencer said the range of existing exemptions to LVR restrictions will continue to apply under the proposed changes.
These exemptions permit banks to make high LVR loans that would otherwise be limited by the restrictions.
The exemptions, which apply to both investors and owner-occupiers, include new builds; bridging finance; re-financing existing high LVR loans; funding for non-routine extensive repairs due to events like natural disaster or weather tightness issues.
Also, borrowers with owner occupied and investor collateral can use the combined collateral exemption to obtain finance up to 60% of the value of the investment properties and 80% on their owner occupied property.
Spencer said it is important to emphasise that the exemptions are permissive but do not create an obligation on the banks to make such loans.
“The banks will still apply their own lending criteria to individual borrowers and may choose to not provide finance in these circumstances or to provide it only at lower LVRs.”
The consultation process closed on 10 August and the Reserve Bank is continuing to analyse submissions.
Spencer said further adjustments to the proposals, including the exemptions, are still possible but the Reserve Bank expects to publish a final policy position later this month.
