LVR Rules Explained: Deposits, Low-Equity Lending, and What Changed from 1 December 2025

These rules don’t stop low-deposit lending altogether, but they do limit how much of it banks can do at any point in time. That’s why some borrowers with 10–15% deposits get approved quickly, while others feel like they’re running into a brick wall even with stable income.

The good news is that the Reserve Bank eased LVR settings from 1 December 2025, which gives banks more flexibility for low-deposit lending. (Reserve Bank of New Zealand)

This guide explains what LVR rules are, what changed, and what it means for first-home buyers, home movers, and investors in 2026.

What is an LVR?

LVR stands for loan-to-value ratio. It measures how much you’re borrowing compared to the value of the property.

The simple formula

• LVR = loan amount ÷ property value

Example:

• Property price: $800,000

• Deposit: $160,000 (20%)

• Loan: $640,000

• LVR: 80%

Why lenders care about LVR

Lower deposits mean higher LVRs, which increases risk for the lender if:

• house prices fall, or

• the borrower needs to sell quickly and doesn’t have much equity buffer.

What are the NZ LVR restriction thresholds?

The Reserve Bank applies LVR restrictions through “speed limits” on high-LVR lending. These speed limits cap the share of a bank’s new lending that can sit above specific LVR thresholds. (Reserve Bank of New Zealand)

Owner-occupiers: the key threshold is 80% LVR

An owner-occupier loan above 80% LVR generally means the borrower has less than a 20% deposit.

From 1 December 2025, banks can allocate up to 25% of their new owner-occupier lending to loans above 80% LVR (up from 20%). (Reserve Bank of New Zealand)

Investors: the key threshold is 70% LVR

For investors, a loan above 70% LVR generally means the borrower has less than a 30% deposit.

From 1 December 2025, banks can allocate up to 10% of their new investor lending to loans above 70% LVR (up from 5%). (Reserve Bank of New Zealand)

What changed from 1 December 2025, and why it matters

The Reserve Bank’s explanation for easing LVR settings was essentially: DTIs are now doing part of the risk-control job, so LVR settings can be less restrictive on average. (Reserve Bank of New Zealand)

What this means in practice

• There should be a slightly bigger pool of bank capacity for low-deposit owner-occupier lending.

• Competition for those low-deposit “slots” still exists, especially at peak buying seasons.

• Approval remains highly dependent on serviceability, conduct, and overall borrower profile.

If you want the companion piece on DTIs (because this is the other half of the story) then check out our DTI Rules Explained.

Why low-deposit approvals can still feel inconsistent

Even with looser LVR speed limits, banks still apply their own internal rules and risk appetite. Two borrowers with the same deposit can get different outcomes because of:

Serviceability and expenses

Banks are still focused on whether the repayments remain affordable under stressed interest rate assumptions. Read more about how banks assess serviceability.

Credit conduct and existing debt

Credit card limits, personal loans, Buy Now Pay Later activity, and overdrafts can all reduce borrowing capacity, particularly for low-deposit borrowers.

Property type and location

Some property types are considered higher risk (for example, small apartments, certain construction types, or properties in less liquid markets). This can affect how a bank treats the security even when the deposit looks okay.

What LVR rules mean for different borrowers

First-home buyers

For most first-home buyers, the practical deposit “sweet spots” are:

• 20% deposit: simplest approvals, best pricing, fewer extra fees

• 10–15% deposit: possible, but profile and lender choice matter more

• 5% deposit: typically via specific pathways (such as Kāinga Ora First Home Loans) and strict eligibility

Our first home buyers guide covers this in more detail, and if you are short on your deposit take a look at our guide on how to use a guarantor or family equity.

Home movers and upgraders

Movers often have equity, but can still run into LVR issues if:

• they’re bridging, or

• they’re purchasing before selling and temporarily need a larger loan.

The main practical advice here is planning and timing: structuring the purchase and sale correctly can make a big difference to approval and pricing.

Investors

Investors remain more constrained on deposit than owner-occupiers due to the 70% threshold and the smaller 10% speed limit above it. (Reserve Bank of New Zealand)

The investor reality is usually:

• stronger deposits and buffers get better outcomes, and

• portfolio structure and total leverage matter as much as the deal in front of you.

If you’re investing, you must also factor in tax settings, read more about how this can impact you.

Overseas buyers and expats

Overseas-buyer lending can have its own deposit expectations depending on residency and lender policy. Refer to our full guide to help you understand these rules when buying in New Zealand.

Low-equity premiums and why a 20% deposit can be worth more than you think

Even if you can get approved with 10–15% deposit, some banks may apply a low-equity premium (LEP) through:

• a higher interest rate, or

• a one-off fee / margin adjustment.

That’s why borrowers often compare two strategies:

• buy sooner with a smaller deposit but higher ongoing cost, or

• wait and reach 20% to unlock sharper pricing and reduce extra fees.

There’s no universal right answer; it depends on your timeframe, savings rate, and comfort with repayment levels.

If you want to sanity-check affordability quickly then check out our mortgage serviceability calculator.

How to improve your chances with a smaller deposit

Strengthen what the bank can control

• Reduce consumer debt and credit card limits

• Keep accounts tidy (avoid overdrafts and “scraping by” behaviours)

• Prepare clean documentation early (income, expenses, existing liabilities)

Choose a structure that fits your real cashflow

Sometimes a slightly different structure can help:

• splitting terms for budget management

• using offset/revolving credit if you hold cash buffers

Check out some of our guides on mortgage structures:

• Mortgage Laddering (splitting your loan into multiple parts)

• Mortgage repayment structures explained (offset vs redraw vs standard-loan)

Don’t assume one bank’s answer is the market’s answer

Different lenders can view the same profile differently, especially around low-deposit lending, property type, and income structure.

Our final word

The key points

• LVR rules limit how much low-deposit lending banks can do, using “speed limits” above specific thresholds. (Reserve Bank of New Zealand)

• From 1 December 2025, banks can do more low-deposit lending:

  • Owner-occupiers: up to 25% of new lending above 80% LVR

  • Investors: up to 10% of new lending above 70% LVR (Reserve Bank of New Zealand)

• Even with looser LVR settings, serviceability and borrower profile remain decisive.

• A 20% deposit still tends to unlock better pricing and smoother approvals, but there are workable pathways below 20% for strong applicants.

Talk to our advisers

If you’re buying with less than 20% deposit, small details can make a big difference to both approval and long-term cost. Our advisers can help you:

• Compare bank appetite for low-deposit lending and property types

• Position your application to strengthen serviceability and reduce “hidden” issues

• Structure the loan to fit your cashflow (including split terms or offset where suitable)

• Map a plan to reach better pricing over time as your equity improves

Get in touch and we’ll walk you through your options in plain English.