Before yesterday’s announcement, they could only afford to buy another property worth $500k.

Under the new change, they can now afford a property worth $714k. A massive $214k difference.

That’s because they can now borrow more against the property they already own. And they don’t need as big of a deposit for the new one they want to buy.

Not all property investors will see this large of a change.

But, some investors will find they can now buy when they couldn’t before.

What impact will the changes really have?

The change will impact investors more than owner-occupiers.

That’s because investors with mortgages make up about 25% of the market.

Owner-occupiers make up about 60% of the property market. And the Reserve Bank’s 5% boost to low deposit lending means that only 3% of the market will be impacted – (60% x 5% = 3%).

On top of this, even when the cap for low deposit lending was higher, the banks never hit it.

In fact, by the Reserve Bank’s own data, more than 10% of bank lending is with less than a 20% deposit.

That’s because the data doesn’t take into consideration the exemptions from the LVR rules (new builds, refinancing etc.).

The critical point is that this change may not impact owner-occupiers much … because the banks weren’t lending up to the limit previously.

The main impact will be on investors. And after last week’s inflation news, the evidence is starting to pile up that the end of the housing market downturn is near.

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Andrew Nicol

Managing Director, 20+ Years' Experience Investing In Property, Author & Host

Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.

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