The Reserve Bank of New Zealand has decided to loosen the loan-to-value ratio (LVR) restrictions, as stated today by the Deputy Governor and head of financial stability Christian Hawkesby on Wednesday.

"Our assessment is that the risks to financial stability posed by high-LVR lending have reduced to a level where the current restrictions may be unnecessarily reducing efficiency. In particular, impeding the provision of credit to some otherwise creditworthy borrowers, which is not proportionate to the level of risk that we see," Hawkesby said.

The loosening means for owner-occupiers that banks will now be able to advance up to 15% of their new lending (up from 10%) to customers borrowing on a loan-to-value ratio of in excess of 80%. For investors, the tight restriction that they must have 40% deposits to buy will be moved lower to 35%.

NZD/USD update

• NZD/USD bears take back control on banking sector concerns

NZD/USD fell to a low of 0.6133 in Tuesday´s trade after suffering a risk-off blow with the US Dollar tearing higher since the early Europen session. NZD/USD fell from a high of 0.6187 on the day.