New Zealand’s central bank to maintain current home lending rules
Housing remains a drag on New Zealand’s uneven economic recovery
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[WELLINGTON] New Zealand’s central bank said on Friday (Aug 14) it would maintain the current mortgage loan-to-value ratio rules after considering house prices, the financial strain among existing borrowers and the resilience of the banking system.
“We review settings annually to ensure they remain appropriate given housing market conditions and financial stability risks,” Reserve Bank of New Zealand Assistant Governor Financial Stability Angus McGregor said in a statement.
The Financial Policy Committee retained restrictions in place since December that allow banks to issue up to 25 per cent of new owner-occupier loans with loan-to-value ratios above 80 per cent, and up to 10 per cent of new investor loans with LVRs above 70 per cent.
The rules require borrowers with smaller deposits to account for only a limited share of banks’ mortgage books, aiming to curb riskier lending and reduce the banking system’s exposure to a sharp housing market correction.
Housing remains a drag on New Zealand’s uneven economic recovery. The latest Real Estate Institute of New Zealand data showed national house prices remained broadly flat, extending a prolonged period of weak price growth that has restrained household wealth, spending and confidence.
The subdued market has also weighed on residential construction, a major component of domestic activity, even as new dwelling consents have risen over the past year.
“Housing risks are currently contained,” McGregor said, adding that mortgage lending growth was modest and the share of higher-risk lending remained manageable.
Debt-to-income restrictions would also remain in force, the bank said, describing them as an important guardrail against a buildup of high-risk lending during periods of low interest rates and stronger housing demand.
The RBNZ said it would continue monitoring house prices, mortgage lending and broader financial-stability risks. Its next review is expected in around 12 months, though it could be brought forward if conditions warrant. REUTERS
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