Reserve Bank to monitor LVR breaches caused by Covid-19
With house prices expected to fall through 2020, more borrowers could fall into low equity situations by the end of the year. Westpac predicts house prices could fall by 7% in the second half of 2020.
Borrowers with high LVR loans could put strain on banks' lending limits if prices fall significantly.
Banks are currently bound by speed limits for high LVR lending. Banks can provide up to 20% of their owner-occupier loans to those with a deposit of less than 20%. Lenders can allocate 5% of their book to borrowers with less than a 30% deposit.
Meanwhile, borrowers deferring payments on mortgages could also drop into low equity situations as interest accrues.
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