RBNZ activates DTI restrictions - June 2024

The Reserve Bank (RBNZ) has confirmed “activation” of the new debt-to-income (DTI) restrictions, along with the related loosening of loan to value ratio (LVR) limits from July 1 this year.

Speed limits to lending will apply:
» 20% of new owner-occupier lending to borrowers with a DTI ratio over 6; and
» 20% of new investor lending to borrowers with a DTI ratio over 7.

Banks will need to comply with the new DTI and LVR restrictions from July 1, 2024; having previously been given 12 months to prepare their systems for the possible implementation of DTI restrictions.

Some banks have already written these changes into their policies, extra requirements include:

• All income sources needing to be evidenced
• All external debt being evidenced
• All debt limits taken into consideration regardless of nil balance, including credit cards, personal loans and overdraft facilities
• Higher uncommitted income requirements in the loan servicing calculators for different DTI levels for example, an investor with:
○ A DTI <7 and LVR of 65% requires a pass in the banks loan calculator of $200 per month, and
○ A DTI >7 and LVR of >65%<80% requires a pass in the banks calculator of $300 per month, and
○ A DTI >7 and LVR of >80% requires a pass in the banks calculator of $750 per month

The calculation for DTI equals total debt divided by total annual gross income. Some exempt scenarios to DTI ratios include:
• Refinancing
• Purchasing a new build
• Construction loans
• Kai Nga Ora Loans
• Bridging finance

Loosening of the LVR requirements will coincide with banks speed limits now being:
» 20% of new owner-occupier lending over 80%
» 5% of new investor lending with an LVR above 70%

We’re expecting a lot of change and appetite for different LVR and DTI levels are likely going to vary between lenders.

Article contributed by Vega Mortgages