COMMENT: When the Reserve Bank announced the return of the loan to value ratio (LVR) restrictions earlier this month, the main focus was, without doubt, on investors. Most banks had imposed a 40% deposit requirement on investment purchases well before the Reserve Bank's order, but by May 1 this will be mandatory. The exception to the investment deposit rule is new-build properties.

New-builds (defined as properties that are no more than six months old and are purchased directly from the developer) will not require a 40% deposit if they are bought as an investment.

For the last seven years, deposit requirements for investors for new-builds have for the most part been 20%. In a truly rational-thinking economic market, investors who were cut out by the 40% deposit rule would simply start buying new-builds, which would seems to go against the Reserve Bank's goal of cooling the housing market by removing investors from the buyer pool.

But in the past two weeks, we’ve seen from the lending banks some interesting responses to Reserve Bank's new rules. ASB first advised brokers that it would not be approving loans to investors for new builds unless that had a 40% deposit and then switched course.

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The fact is that just because the Reserve Bank says that new-builds are exempt from the LVR restrictions doesn’t mean that the banks actually have to lend up to 80% on them. And some banks are playing with requiring 40% deposit on new-build investment properties just to get on top of the backlog of mortgages that sit on their desks. The backlog that has been there since June 2020.

At the end of the day, new-builds are good for the economy. A flood of well-built homes - for example, Six HomeStar rated - on the market would be a good thing for the housing market, good for first home-buyers and good for investors who want to look after their tenants.

But over the next three months, both investors and first-home buyers will want to time their pre-approval application for when the banks swing their deposit requirements to the more relaxed end of the spectrum. In this lending environment, a decline this week because of an unacceptably low deposit is not necessarily a decline next week.

- Rupert Gough is the founder and CEO of Mortgage Lab and author of The Successful First Home Buyer.