Getting into a home with a low deposit just got a little bit easier—here’s why

In a nutshell:

• Many first-home buyers need to borrow more than 80% of their home's purchase price in order to get onto the property ladder.
• The Reserve Bank sets 'speed limits' as part of its LVR restrictions, which which dictate how much lending each bank can do above that 80% threshold (i.e. to low-deposit borrowers).
• From 1 December 2025, those speed limits have increased from 20% of each bank’s lending to 25% for owner-occupied borrowers. 
• This is excellent news for first-home buyers, as it means they now have access to a bigger pool of funds to enable their journey to homeownership. 
• The restrictions have also eased slightly for those purchasing investment properties with low deposits. 

As of 1^st December 2025, LVR rules have changed—making the process of getting a home loan just that little bit easier for anyone working with less than a 20% deposit. 

Here’s the rundown on what’s happened, and what it means for Kiwi borrowers. 

First up, what are LVRs exactly?

Known as LVRs for short—loan-to-value ratios for long—these are the rules which dictate the maximum amount you can borrow on your mortgage, based on a percentage of the value of the property.  

• For owner-occupiers—LVRs are typically capped at 80% for existing properties (which is where the golden 20% deposit rule comes from) and 90% for new builds.
• For property investors—LVRs are capped at 70% for existing properties and 80% for new builds.

The banks have discretion to do a certain proportion of their lending over and above these LVR limits—which again, varies by type of borrower. 

Why do LVRs exist?

LVRs work alongside other restrictions set and managed by the Reserve Bank (RBNZ), designed to keep our financial system and broader housing market more stable. 

DTIs, or debt-to income ratios, are the other big one—introduced in 2024—which limit how much debt you can borrow in relation to your income. 

LVRs achieve their goal by:

1. Helping to protect the banks against financial losses when house prices are falling. 

Falling house prices are risky for the banks because:

1. They typically coincide with periods of high interest rates—where increased mortgage costs are putting borrowers under significant financial pressure. 
2. If a borrower falls behind on their mortgage payments and ends up needing to sell their home, there’s a chance—depending on how long they’ve owned the property—they may have to sell at a loss.

Having minimum deposit requirements in place gives the banks a good financial buffer to work with, ensuring that it’s the borrower who absorbs any losses first. Only if prices fall far enough to leave the homeowner in negative equity—i.e. where their property is worth less than what they owe on their mortgage—is the bank’s own money at risk. 

As long as the borrower’s been in their home for a few years (and has had the chance to build up a decent level of equity) that’s pretty unlikely.

 2. Helping to limit the likelihood of 'fire sales' during periods of high interest rates. 

When borrowers are under pressure to sell (i.e. because of financial stress), they’re often less concerned with holding out for the best price, and more with just getting it sold as quickly as possible—even at a loss. 

This is what’s known as a ‘fire sale’.

Now, the odd fire sale or two is fine, but when you get lots happening all at once, it can lead to large, drops in house prices—which is the last thing you want when the housing market is already on a downward slope. 

Minimum deposit requirements help to prevent this scenario in two ways:

• Practically speaking, they reduce the likelihood of people falling into negative equity. As long as borrowers are in positive equity, they have a lot more options available to help them cope during periods of high interest rates, such as refinancing or switching to temporary interest-only terms.
• The idea also is that, when borrowers have lots of skin in the game, they’ll fight harder to keep up with mortgage payments and stay in their home even when the going gets really tough i.e. they’ll be less willing to sell at any price.

3. And finally, they limit how much low deposit lending the banks can take on. 

As part of its LVR restrictions, the RBNZ sets ‘speed limits’ dictating how much low deposit lending the banks are allowed to do at any given time. 

These speed limits are expressed as a proportion of the bank’s overall lending and differ by type of borrower—with the speed limit for owner-occupiers generally being much higher than that for investors.

Unlike LVRs themselves, which have stayed pretty much the same since they were introduced in 2013, the RBNZ regularly reviews its speed limit settings, dialing them up or down in response to what’s happening out in the housing market:

• When demand is running really hot—i.e. FOMO (fear of missing out) has taken hold and house prices are at risk of taking off—tightening speed limits can help to bring a bit of balance back into the equation.
• When the housing market is weak, loosening LVR speed limits—increasing the banks’ appetite for lending to low-deposit borrowers—can help to bolster demand. 

So, what about LVR restrictions has changed? And what does it mean for borrowers?

As of 1^st December 2025—in response to what’s been a pretty flat housing market over the last year or so—the RBNZ has loosened its LVR ‘speed limits’, essentially giving the banks greater capacity to lend to low deposit borrowers. 

The new limits are as follows:

• For owner-occupiers: banks can now do up to 25% of their total lending in the low-deposit space (up from 20%)
• For property investors: lenders can now do up to 10% of their total mortgage lending to low-deposit borrowers (up from 5%).

It’s great news for low-deposit borrowers in general, but especially first home buyers—who as of May 2025, accounted for almost 80% of low-deposit owner-occupied lending in New Zealand.

In short, the pool of funding available to low-deposit borrowers has just gotten a little bigger, helping to bring the dream of homeownership that much closer for many Kiwi.

Keen to get into your first home with a low deposit? If you’d like some expert advice on how to make it all happen—get in touch to book a chat with one of our friendly mortgage advisers today.