The New Zealand Bankers Association said yesterday banks would continue to work to meet the needs of their customers.
Association chief executive Kirk Hope warned people should be aware they might be declined loans because of the restrictions imposed by the Reserve Bank.
''It's worth talking to your bank about your individual needs and circumstances.''
Most small New Zealand businesses raised investment capital through their homes. LVR caps might limit their ability to invest in their businesses, he said.
The lending limits might also make it more difficult for first-home buyers and home-owners seeking a top-up loan for renovations.
''We have reassured the Government that as an industry we will respond constructively and responsibly to new lending limits. Our banks are very competitive and will continue to do all they can to meet the needs of all sectors of their customer base.''
The real issue was a lack of housing supply in some parts of the country, not the availability of cheap credit, Mr Kirk said.
While there were positive moves to deal with the supply issues, that would take some time to be resolved. Credit growth, currently around 5%, was not driving that, he said.
Reserve Bank governor Graeme Wheeler announced the much anticipated LVR restrictions on housing mortgage loans in a speech at the University of Otago.
Banks would be required to restrict new residential mortgage lending at LVRs of more than 80% to no more than 10% of the dollar value of their new housing lending flows.
The bank estimated the 10% speed limit would limit the banks' high-LVR lending flows to about 15% of their new residential lending.
Housing played a critical role in the economy, representing nearly three-quarters of household assets. Mortgage credit accounted for more than half of banking system lending.
The Reserve Bank was concerned about the rate at which house prices were increasing and the potential risks that posed to the financial system and the broader economy, he said.
Rapidly increasing house prices increased the likelihood and the potential impact of a significant fall in house prices.
That was particularly the case in a market that was already widely considered to be over-valued, Mr Wheeler said.
Kiwibank chief executive Paul Brock was working through the implications of the announcement but promised to put first-home buyers at the front of the lending queue.
''When it comes to lending with deposits of less than 20%, we will give priority to first-home buyers over those who are buying investment properties.''
Kiwibank was committed to getting people on to the property ladder, he said.
''We strongly believe the critical issue when assessing a loan application is the ability to service the debt rather than the amount of equity a person has in a loan.''
Equity could be built over time and Kiwibank did not want to push people out of purchasing a family home while they waited many years to save a much bigger deposit. However, to do that, the bank would have to set priorities for its lending and first-home buyers came first, Mr Brock said.
Westpac chief economist Dominick Stephens said Mr Wheeler was unwilling to lift the official cash rate from 2.5% given a still benign inflation picture and concerns raising the OCR could push an already over-valued exchange rate higher.
The hope was the LVR restrictions would slow the housing market, giving monetary policy more flexibility to hike later or more slowly.
Westpac's view was the effectiveness of the measures in cooling the housing market would prove limited. In that regard, Mr Wheeler noted if the measures were not considered to be effective, they would be removed.
''We believe the Reserve Bank will not be able to avoid hiking the OCR by March next year,'' Mr Stephens said.
After the announcement, the share price of ANZ and Westpac fell and the New Zealand dollar lost nearly US1c in value.
